Scott Wagner: SB 1 is a solution to the state's pension problems (column)

http://www.ydr.com/letters/ci_28122724/scott-wagner-sb-1-is-solution-states-pension

Property tax elimination is the No. 1 issue I was sent to Harrisburg to address, but do you know why your property taxes continue to rise every year and why in general, taxes in Pennsylvania are so high? Here is the answer: Salaries and benefits of state and school employees, including pension benefits. We cannot even begin to address property taxes if we do not get spending under control, and the top priority right now in the Senate is pension reform.Pennsylvania's two public pension systems, the State Employees Retirement System (SERS) and the Public School Employees Retirement System (PSERS), have a combined total of $50 billion in unfunded liabilities. Let me repeat that — $50 billion. In comparison, our entire state budget for the current fiscal year is $29 billion.

 I continue to be amazed by individuals who claim we do not have a pension crisis, while some recognize the problem but continue to argue that the problem is due to years of non-payment or under payment by the state and school districts. We cannot deny that there have been missteps along the way, but simply pointing the finger without offering solutions is not productive.Senate Bill 1 is a solution.I joined 25 of my colleagues, including Majority Leader Senator Jake Corman and Appropriations Chairman Pat Browne, as a co-sponsor of Senate Bill 1, a comprehensive pension reform proposal.

The primary focus of this bill is to move future employees into a 401(k)-style pension plan. In addition, current employees would choose to either increase their contribution rate to maintain increased benefits provided through Act 9 of 2001 or revert back to pre-Act 9 levels if they do not want to increase their contributions. Current retirees would not be affected.AdvertisementPennsylvania's private sector is very familiar with 401(k)-style pension plans, and I have been advocating since last year for such a change because we cannot maintain our current pension system at the rate we are going. Longterm sustainability is needed for the system, for employees, for retirees and for taxpayers.

Cost-saving impacts may not be immediate, but as we regain control of the pension system, the commonwealth and school districts could start seeing less reliance on taxes and more dollars to fund important programs — and to drive more money into classrooms rather than into pensions.On the issue of employer contributions and claims that the state and school districts have not met their obligations, a key part to understand is that during difficult economic times, employers are called on to contribute even more money because the system has not performed up to expectations.

Let's think about this. The economy is not doing well, therefore revenues are down, and somehow we are to find money to pay into a system that has not performed.The recession of 2008 is a prime example of how poor performance can impact the system. Sen. Corman recently explained in the Senate Finance Committee meeting when SB 1 was considered that in 2008, we lost $30 billion in pension value. As Sen. Corman stated, "That's not the employees' fault, that's not the employers' fault — we lost $30 billion because of the market. The taxpayers have to pick that up; that's completely on the hands of the taxpayers."Compound poor market performance with exorbitant pensions, and it is no wonder we are in the position we are in. This year alone we face a $1 billion increase in our pension obligation. This equates to needing an extra $723 million in the general fund and $271 million for school districts — just for pensions.

Recently, PennLive.com/The Patriot News did a series of articles on state pensions called "Set for Life." This included a database of everyone in the state system currently receiving a six-figure pension. Yes, as in, over $100,000 a year. Please take the time to explore this database to see in particular all of the retired Penn State employees and school superintendents and how much they are receiving each year in their state pension, which is not taxable in Pennsylvania.The PennLive series was timely in that it coincided with the introduction of SB 1. At the time of submission of this piece, the Senate was preparing to consider SB 1 on final passage. Both the Senate Finance Committee and the Senate Appropriations Committee approved the bill, and the Public Employee Retirement Commission issued a study on the plan estimating cost savings ranging from $8 billion to $18 billion.

Whether you agree or disagree with SB 1, we all must acknowledge there is a problem that needs to be addressed now. The current system is unsustainable, and if we continue to do nothing, employees and retirees could be left with nothing in the end. 

Last edited by Common Sense (5/17/2015 9:15 am)