November 11, 2013
By Barry Bogarde
Gov. Corbett and his allies are once again scheming to push for extreme pension reform proposals that stand to dramatically alter the retirement security of our cops, firefighters, teachers, nurses and public employees. The newest round of public pension reform, including the governor’s 401(k) proposal and a “cash balance” plan introduced in the state House, are merely experiments that directly impact the retirement security of 800,000 middle-class Pennsylvanians while footing the taxpayers with a costly price tag.
As a supervisor at PennDOT, I can attest there are none others more committed to the long-term sustainability of the Pennsylvania pension system than the public employees who rely on the system for a secure retirement. Currently, the average retiree pension payout is a modest $24,000 per year, and public employees sacrifice close to 7 percent of every paycheck toward their retirement. [EXPAND Read more]
That’s why we have already made a series of concessions to ensure the system remains solvent. Through passage of Act 120 in 2010, public employees accepted a series of reforms to set the state on a fiscally responsible course. These include retirement benefits reduced by more than one-fifth, capping maximum pension benefits and increasing the minimum retirement age in order to receive full benefits.
Not only do Pennsylvania’s public employees provide essential services to our communities, but our retirement incomes are also important contributors to our local economies and job creation — driven in part by our stable retirement. Proposals designed to slash our retirement benefits could well impact the food on our tables, bills to be paid and the roof over our heads.
Already, there are concerns over whether these alternatives would undermine current funding flows into Pennsylvania’s public pensions. Gov. Corbett’s 401(k) proposal has been calculated to increase pension funding costs to taxpayers by $40 billion over 30 years. Economists and experts are worried the state House cash balance plan would lower current rate-of-return investment targets, potentially eroding the investment returns needed to keep public pensions funded. The main takeaway is these inferior alternatives would only exacerbate the state’s unfunded liabilities, repeating Pennsylvania’s past fiscal mistakes.
While taxpayers are expected to take a large financial hit with these plans, both public employees and public services would also suffer. A study produced by the Keystone Research Center recently showed cash balance plans would reduce school and state employees’ pension benefits by 20 percent, and erode the benefits of long-term career employees by 35-60 percent. Gov. Corbett’s 401(k) proposal would destabilize the state’s current benefits structure and likely undermine the very notion of retirement security. This all means the latest reform proposals will be a disincentive for Pennsylvanians to commit to careers in public service, robbing the commonwealth of a highly trained and experienced workforce.
It is unacceptable for our elected officials to continue entertaining flawed proposals. Instead, they should work to sustain the retirement security of Pennsylvania’s middle-class families while gradually returning order to the state’s fiscal house. But that can’t happen as long as Gov. Corbett and his friends continue to experiment with risky pension reform proposals and foot taxpayers with an unknown price tag. [/EXPAND]