John Baer: State-worker pension reform: No will, no way

Posted: January 31, 2013

THE PENDING FIGHT over pensions for Pennsylvania state workers and public-school employees is certain to include enough actuarial data and ideology to make most minds, including mine, go numb.

We're talking billions of obligated tax dollars to hundreds of thousands of people, lots of politics, Rubik's Cube-like fiscal stuff, some of which will wind up in court, making more paydays for lawyers.

It is, in short, a cluster-shag.

At the heart of the issue is a divide separating (most) Democratic/union thinking and (most) Republican/business thinking.

With the Governor's Office, House and Senate in GOP control, the edge seems with the latter, but even GOP leaders question what can be done and when.

The fight bell formally sounds on Tuesday, when Gov. Corbett reportedly will offer a pension-reform proposal as part of his annual budget presentation to the Legislature.

At a Pennsylvania Press Club luncheon Monday, Corbett's budget secretary, Charles Zogby, said: "To not do pension reform will mean we then have to go back into the general-fund budget to find savings. That will mean cuts."

He suggested that the cuts would be in education.

But it's not clear that lawmakers will address pensions as part of the budget.

What is certain is that current retirees won't be affected. And it seems that Corbett is seeking changes for new employees, likely moving them from the "defined" plan to an employee-contribution plan such as a 401(k), which is common in the private sector.

This is viewed only as a "tourniquet" to stop the bleeding: up to $44 billion in long-term liability costing taxpayers $511 million in the next budget.

So, it's expected that Corbett also will seek cuts for current workers. This could mean reducing the formula for calculating pensions and changing the rules on counting overtime in the final years of employment.

Any change for current employees, if enacted, is headed to court, maybe for years, as unions sue to protect their members.

The pension problem stems largely from two sources: a greed-grab in 2001, when the Legislature and Republican Gov. Tom Ridge increased state pensions; and the economic collapse of 2008.

The politics?

Republicans tend to play off resentment against unionized workers and push for less government spending. Democrats tend to protect unions, arguing that it isn't workers' fault that pols got greedy in '01 or that the economy tanked in '08.

House Democratic Leader Frank Dermody says that pension fixes by the Legislature in 2010 cut new-employee benefits, are working well and will ease the problem over time. And he says that revenue lost because of Corbett's business-tax policies, including his refusal to push a real tax on Marcellus Shale drilling, could solve the problem, making pension changes "unnecessary."

(Others suggest that any more tax revenue would go to schools, public safety or human services, not to an unfunded liability that so few understand.)

GOP Senate President Joe Scarnati questions whether savings from current workers can stand in court: "Are we going to find ourselves banking savings that aren't real savings?"

Asked if there are enough Senate votes to cut current-employee benefits, Scarnati says, "I'm not sure."

House Speaker Sam Smith says he doubts that the House will cut current pensions.

And both Scarnati and Smith question proposals to link pension reform to a budget.

What happens?

Rick Dreyfuss is a business consultant, an actuarial with 30 years' experience and a senior fellow at the Manhattan Institute, a conservative New York think tank.

He questions the political will to do much more than a short-term fix.

"What's driving this is the budget," he says, "[and] how little we can put into the plan next year. . . . Are we properly funding these pension plans? We are not doing that now."

Options to do so, says Dreyfuss, include selling/leasing assets, floating bonds, cutting spending or raising taxes.

So problem practically solved, eh?


Email: baerj@phillynews.com

Blog: philly.com/BaerGrowls

Columns: philly.com/JohnBaer

|
|
|
|
|