Clearly, Pennsylvania is facing a snowballing pension bill, expected to mushroom from $52 billion today to more than $65 billion by 2021, to cover retirement benefits promised to more than 800,000 state and public school employees.
It’s also true that a handful of local governments — primarily large and midsize cities like Philadelphia, Pittsburgh and Scranton — have retirement programs that are underwater and have been for quite some time.
But the majority of municipal pension plans are doing just fine and provide a stark contrast to the horror stories. In places like Bethel Township in Berks County, Castanea Township in Clinton County, Connellsville Township in Fayette County, and Great Bend Township in Susquehanna County, employee pension plans are overfunded by as much as 700 percent.
These communities are the rule, not the exception, according to recent data from the Pennsylvania Employee Retirement Commission, which has been documenting the distress level of the 1,448 municipalities that receive state aid to offset mandated retirement benefits.
Despite the small number of severely distressed municipal plans, some are portraying the problems of a few as a statewide epidemic and want everyone, including communities that have kept their pension plans healthy and above water, to swallow the same bad medicine.
They’d like to consolidate all local retirement plans into a single statewide system and let the healthy ones’ assets be used to balance the troubled ones. But bigger isn’t better. All we have to do is look at the state’s behemoth and woefully underfunded system, which accounts for 90 percent of the pension stress in the state, for proof of that.
Lawmakers and others have to stop ignoring the giant elephant in the room — the state’s out-of-control pension system — and finally do something about it. Between the retirement benefits offered through the State Employees Retirement System and the Public School Employees Retirement System, Pennsylvania has accumulated more than $52 billion in pension obligations and that number continues to grow.
Proposed reform options include switching employees from a defined benefit to a defined contribution plan, similar to a 401(k). That won’t fix the shortfall but it will reduce future retirement costs, a step in the right direction.
Another good step for state officials: Admit that local governments “get it” and take some lessons from them. Why not study what pension-smart municipalities are doing right?
The Pennsylvania State Association of Township Supervisors supports a proposal that would stop third-party arbitrators from including municipal police and firefighter pension benefits in contract negotiations. This practice has significantly escalated municipal pension costs at the expense of local budgets and taxpayers.
The state’s pension crisis — and I emphasize the word “state” here — didn’t happen overnight. Neither will it be solved overnight. But let’s not get distracted with misguided efforts focused on municipal pension plans. Most of them are just fine.
Source: Pittsburgh Tribune-Review