Corbett says education funding is tied to pension savings

Posted: January 24, 2013

Gov. Corbett said Wednesday that he would not slash funding in his forthcoming budget for basic education or the four state-related universities, although he cautioned that could change if there was no legislative giveback on one of his priorities: reining in public-employee pension costs.

"This is the driver," Corbett said of tackling what his administration has called Pennsylvania's pension crisis. "We are going to present a budget based on some assumptions, and based upon getting some reforms done. And if they can't get the reform done, then there's going to have to be some adjustments to the budget."

With that, the governor drew a line that could end up defining the coming budget battle in the Capitol. On Feb. 5, he is scheduled to deliver his budget proposal to the legislature, and he and top aides have spent the last few months crisscrossing the state to build his case for why pension costs - the "tapeworm," as he has repeatedly called it - should take precedence.

Speaking before the Inquirer Editorial Board on Wednesday, Corbett and his budget secretary, Charles Zogby, reiterated many of the points contained in a 19-page report Zogby's office issued in the fall. They said the pension problem had been created by a combination of generous enhancements to retirement benefits over the last decade, lackluster investment returns, and nearly a decade of underfunding by state government and local school districts.

The result: The two public pension plans, for state workers and public school employees, have an unfunded liability of $41 billion. And over the next few years, pension costs are projected to skyrocket, threatening to gobble most of any additional revenue coming in to state coffers and leading, in turn, to a need for steep spending cuts and even steeper property-tax increases.

That grim fiscal picture aside, Corbett and Zogby offered few details about what their pension solution would be, saying they would roll that out during the governor's budget speech.

Corbett did say what not to expect in the budget for the fiscal year that starts July 1: cuts in funding for basic education and the state-related universities - Lincoln, Pennsylvania State, Pittsburgh, and Temple. Education cuts were controversial in his previous budgets.

He and Zogby said they were considering changing how the basic pension formula is calculated, which could have a big impact on what current employees receive when they retire. That is widely expected to be a key area on which the pension battle will be waged with the unions.

He was insistent that retired state and school employees would not be affected by any of the changes he and Zogby envisioned, and that the accrued retirement benefits of current employees should not be touched.

Another item that will be off the table when considering how to deal with pensions: tax increases. Corbett vowed to stick to the no-tax pledge he made in his 2010 campaign.

Even so, asked whether he would make a similar pledge when he faces reelection next year, he declined to reply, saying he wasn't going to discuss his campaign.

Corbett said that when he presents his budget, he will also roll out a long-awaited plan to fund roads, bridges, and mass transit. He had been scheduled to do so this week, and it was not immediately clear why the announcement was delayed.

That plan, details of which emerged last week, is not without controversy. Corbett is looking to uncap the so-called oil company franchise tax to eventually raise close to $2 billion. The tax is levied on the wholesale price of gasoline and is capped at $1.25 per gallon.

Soon after word of that strategy surfaced, Corbett found himself facing questions about whether his proposal would go against his no-tax pledge. Some have suggested that uncapping the franchise tax would inevitably trickle down to motorists in the form of higher prices at the pump.

The governor has said that multiple factors affect gas prices, and that he had not ruled out barring distributors from passing an increase on to customers.

Corbett touched on a range of issues during his visit to The Inquirer. Asked about his hopes for privatizing the Liquor Control Board, he replied with a question of his own: Did the journalists personally know anyone who opposed privatizing the LCB? Polls show wide support.

"We are going to address the LCB," he said with a smile.


Contact Angela Couloumbis at 717-787-5934, acouloumbis@phillynews.com, or follow on Twitter @AngelasInk.

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