Not As I Do... Lawmakers Whiff Again
Pennsylvania legislators infamously have failed to correct the public pension disaster that many current members and their predecessors created in 2001. Yet they bristle at the notion that the modest changes since then do not constitute reform.
By raising their own pension benefits by an unconscionable 50 percent and those for teachers and state employees by 25 percent, then failing to fund the unwarranted largess, lawmakers set in motion the ongoing catastrophe. The state’s two big pension plans are underfunded by more than $70 billion. About 13 percent of the state budget, more than $4 billion a year, now goes to pensions, and each of the state’s 500 school districts must fund an annual pension payment equal to 34 percent of payroll.
Declining to lead by example
Now, the vast majority of state lawmakers have refused to lead by example regarding the pension system.
Under the defined-beneft, traditional benefit plans that are now in crisis, beneficiaries receive their guaranteed benefits regardless of the plans’ actual performance.
One of the changes that lawmakers have approved is requiring all new state employees, including legislators, to enroll in a defined contribution 401(k)-type pension plan like those that have become the standard in the private sector, or hybrid plans combining elements of both types of pensions. The 401(k) plans transfer all of the risk from the employer to the employee. In passing the change, lawmakers also created an option whereby they and other state employees may remain in the guaranteed benefit plan or switch to the 401(k).
This offered an opportunity for lawmakers, who claimed to champion reform in creating the option, to lead by example. Not surprisingly, very few of them have done so.
According to a comprehensive analysis by PennLive.com, only 20 of the 218 lawmakers in the guaranteed-benefit plan have chosen the 401(k) plan.
Locally, Democratic state Sen. John Blake of Archbald voted for the reform bill and chose to remain in the guaranteed-benefit plan; Democratic Rep. Marty Flynn of Scranton voted against the reform bill and chose to remain in the guaranteed-benefit plan. Newly elected Democratic state Rep. Bridget Malloy Kosierowski of Waverly Twp. has not yet entered the pension system, but as a new legislator would be enrolled in one of the new options.
Among legislative leaders, House Speaker Mike Turzai of Allegheny County, Senate President Pro Tem Joe Scarnati of Jefferson County, and House Majority Leader Bryan Cutler of Lancaster County, all Republicans, voted for the reform bill and chose the 401(k) plan. Senate Majority Leader Jake Corman of Centre County, a Republican, along with House Minority Leader Frank Dermody and Senate Minority Leader Jay Costa, both Allegheny County Democrats, voted for the reform bill but chose to retain the guaranteed-benefit pension.
Cost skews government’s purpose
The pension disaster is so pervasive that it changes the priorities of government from providing education and other services, to generating enough money to cover public employees’ massive pension costs.
Given that lawmakers refuse to lead by example on modest changes, there is no chance that they will tackle the major reforms that would relieve taxpayers. The vast benefit increases themselves drove the debacle. Lawmakers should return those benefits to where they were before the unconscionable increases in 2001.
Even though legislators compounded the disaster by rewarding the benefit increases retroactively, they could reduce the benefits to sustainable levels only going forward. They and other public employees would be able to keep the benefits that they have accrued since 2001.
Due to lawmakers’ refusal to enact truly effective reforms, Pennsylvanians may now add unnecessary, massive public pension debt to Benjamin Franklin’s observation that the only things certain are death and taxes.