Bipartisan Work Underway On Pensions, But Resulting Bill Likely Won't Pay Down Debt
A bipartisan group of legislative leaders has been working on a major proposal to change how state employee pensions are structured.
The commonwealth’s roughly $70 billion unfunded pension liability has been dogging lawmakers for years. But the plan most likely to move forward won’t attempt to reduce that debt significantly.
Instead, leaders say the measure will look similar to one they attempted to pass last session, which disintegrated without a vote because Democrats refused to support it.
It would give state employees a few retirement options to choose from, including a 401k-style plan and two defined benefit/defined contribution hybrids.
Senate Majority Leader Jake Corman, who’s sponsoring it, has long held that the point of this reform should be to shift some risk away from taxpayers and onto state employees.
“We’ve seen our contribution rise significantly over the last decade, and there’s no guarantee it will not continue to go higher and higher, until you start moving some of the risk away from the taxpayer,” he said.
An Independent Fiscal Office report on last session’s plan shows risk transfer would be limited at first, but more significant in a few decades.
Bill Patton, spokesman for House Democrats, said the bill won’t pay down the debt any faster. That is the one thing experts say could reduce the state’s debt, short of defaulting on pension payments.
“It does not have much of an impact on the existing debt,” Patton said. “At all.”
Corman said the same.
“Well yeah, the easy thing to say is to pay down the debt faster,” he said. “Sure, that would be better. But we would need a significant tax increase to do that.”
Republicans are resolutely opposed to increasing taxes.
The finished proposal is expected to be released sometime next month.
A spokesman for Governor Tom Wolf didn’t respond to a request for comment, but Wolf has expressed willingness to sign similar bills in the past, and has been part of negotiations.