Op-Ed: State’s New Pension Law Strikes Right Balance for Reform

An Op-Ed By Senators Jake Corman, Majority Leader, and Pat Browne, Appropriations Committee Chairman

The Commonwealth faces a number of significant challenges, but none are as serious as the public employee pension crisis. Pension liabilities have reached a staggering $80 billion and continue to grow with each passing day.

The effects of this crisis have been felt for nearly a decade. Lawmakers have faced massive budget deficits nearly every year since 2008. These fiscal difficulties have prevented us from investing in tax cuts for hardworking families or contributing more money to areas of state government that could benefit from additional funding, including education.

Money that otherwise could have been used in the classroom has been consistently diverted to meet rising pension obligations. The proposed 2017-18 state budget includes $100 million in new money toward education; the increase in the pension payment for school districts is $144 million. The state’s contributions to school district pensions increased from $290 million to a whopping $2.1 billion in the last decade – a 618 percent increase.

The road to addressing this problem has been long and difficult. However, the General Assembly finally took historic action last week to restructure the state’s two public employee pension systems. The resulting legislation is the most comprehensive transfer of risk away from taxpayers in the country.

With the Governor signing Act 5 of 2017 into law, we have transformed state employee and teacher pensions to reflect today’s workforce with a 401(k)-style plan that provides employees with options and portability.

According to an analysis by the Pew Charitable Trust, Act 5 helps “ensure the Commonwealth’s retirement system is sustainable and secure for both taxpayers and public workers for decades to come” and called the enactment of this legislation “the most comprehensive and impactful reform any state has implemented.”

Under the new plan, new employees and lawmakers will choose between three retirement options, including a full 401(k)-style plan or one of two side-by-side hybrid plans that include both a traditional pension and a 401(k)-style option. Current employees will have the opportunity to opt into one of these plans as well, if they so choose. Lawmakers are treated just like every other employee – new lawmakers will be placed into the new plan; current lawmakers will have to choose to opt in. Current retirees will see no changes to their benefit.

The plan also includes the vital component of portability, ensuring that employees can take their benefits with them if they choose a different career path. More than 75 percent of teachers and more than half of state employees leave their job before they reach 20 years of service. These employees would fare better under the new system.

This legislative action is significant not only for how it restructures the retirement system for state employees and teachers, but for how it approaches the problem. Instead of simply dealing with the challenges of the day, this approach instead looks toward the future.

Outside analysis suggests that the plan could shield taxpayers from billions in future costs if investment returns by the pensions systems continue to fail to meet projections. An analysis of both systems shows that if those projections are missed by 1 percent, taxpayers will realize a savings of $27 billion when the new plan is fully in place. At the same time, employees share in the benefit if the returns exceed expectations.

Independent analysis estimates that the restructured pension system will shave more than $5 billion off of the pension debt with an additional savings of up to $3 billion is projected in terms of reduced costs and fees for investment management.

Groups from across the political spectrum such as the Pennsylvania Chamber of Business and Industry, the Commonwealth Foundation and the Pennsylvania Institute of Certified Public Accounts have all acknowledged the importance of this law. The Pennsylvania School Boards Association said the plan provides the “stability our school districts have been calling for and need.”

For many years, there appeared to be no end in sight to the problems plaguing Pennsylvania’s pension systems. With this much-needed modernization of Pennsylvania’s pension systems, we have finally arrived at a solution that strikes the proper balance between the interests of taxpayers and the need to provide competitive retirement benefits for employees.

Senator Jake Corman is the Majority Leader of the Pennsylvania Senate (@JakeCorman or jcorman@pasen.gov). Senator Pat Browne is Chairman of the Pennsylvania Senate Appropriations Committee (@SenatorBrowne or pbrowne@pasen.gov).

Clean State Legislation Clears Senate Judiciary Committee

 

Listen

HARRISBURG – The Senate Judiciary Committee reported out Senate Bill 529, bipartisan legislation sponsored by Senator Scott Wagner (R-28) and Senator Anthony Williams (D-8) that will provide for automatic sealing of criminal records for minor offenses.

Termed “Clean Slate” legislation, SB 529 and its companion, House Bill 1419, are the first of their kind in the nation.  The goal is to eliminate the hurdle that individuals with a criminal record face when seeking opportunities, particularly for employment. 

“As a business owner I see firsthand the impact a criminal record can have on an individual’s attempt to obtain employment or advance their career,” Wagner said.  “Someone who committed a minor offense 20 years ago should not still be judged for that crime today.”

This is the second year in a row that Wagner and Williams have joined forces to sponsor Clean Slate legislation and that the Senate Judiciary Committee has acted swiftly to consider the bill.  Senator Greenleaf, Committee Chairman, is one of 26 co-sponsors from both sides of the aisle that recognize the importance of this proposal. 

“The fact that Clean Slate legislation is moving through the General Assembly is a major step toward reforming our criminal justice system so that those who made mistakes will have the opportunity to become more prosperous and productive citizens,” said Williams. “That kind of progress is beneficial for everyone.”

Having worked to address concerns raised last session with the Pennsylvania State Police and the Administrative Office of the Pennsylvania Courts, both of which will play a role in implementing Clean Slate, Wagner and Williams are confident the legislation has the support needed to move quickly through the legislature.

Senate Bill 529 now goes to the full Senate for consideration.

CONTACT: Erin Marsicano, 717-787-3817, emarsicano@pasen.gov

 

Senate Leaders Hail Passage of Historic Pension Reform Bill

 

Senator Scarnati

 

Senator Corman

 

Senator Browne

The Senate today approved a historic pension reform bill that will transform public employee retirement benefits for the 21st Century and limit future financial risks for taxpayers.

Senate Republican leaders offered the following statement on Senate Bill 1, which is projected to save more than $5 billion and shield taxpayers from $20 billion or more in additional liabilities if state investments fail to meet projections.

Senate President Pro Tempore Joe Scarnati (R-25): “Today we have made historic changes to Pennsylvania’s pension systems.  Senate Bill 1 provides excellent structural reform and many outside experts have been quick to proclaim that this bill goes directly to the head of its class in the nation.  Pension reform is not an easy issue to tackle.  Changes must be made, but we also must acknowledge current retirees and the investments of current state employees.  Senate Bill 1 will help to ensure the stability of our Commonwealth for decades to come.”  WATCH LISTEN

Senate Majority Leader Jake Corman (R-34): “Solving our pension crisis has long been the number one issue that we face in Harrisburg. The current pension structure has created a financial obligation that crowds out other state spending including that for education. This bill looks to the future and addresses the structural problems with the state pension system. It will provide stability and predictability in the state budget. A number of outside groups support this historic change because it puts Pennsylvania on a healthy fiscal path for the future.”  WATCH LISTEN

Senate Appropriations Committee Chair Pat Browne (R-16): “The fundamental problem facing the Commonwealth with its current pension plans is that its collective risk profile is way too high. This pension proposal will allow the state to more effectively mitigate potential debt, provide a competitive benefit for our employees and build a solid platform for the Commonwealth’s future fiscal health by providing the largest risk transfer in the country.” WATCH  LISTEN

Senate Bill 1 has the support of many organizations including:

  • The Pennsylvania Chamber of Business and Industry
  • Chamber of Commerce for Greater Philadelphia
  • The Allegheny Conference/ Pittsburgh Chamber of Commerce
  • The Pew Charitable Trust
  • The Commonwealth Foundation
  • American Legislative Exchange Council
  • Pennsylvania School Boards Association
  • The Pennsylvania Institute of Certified Public Accountants
  • Retirement Security Initiative
  • The Reason Foundation

Senate Bill 1 was sent to the House of Representatives for consideration.

CONTACTS:

Kate Eckhart – Senator Scarnati (717) 787-7084
Jenn Kocher – Senator Corman (717) 787-1377
Matt Moyer – Senator Browne  (717) 787-1349

Senate Bill 1 – Pension Reform

Senate Appropriations Committee Meeting

June 4, 2017

Off the Floor in the Rules Room

 

Senate Bill 1 (Senator Corman) Pension Reform Legislation.  

                   Re-reported as Amended: 18-8

 

 

Langerholc Leads Pension Reform Effort in Senate

HARRISBURG (June 4, 2017) Sen. Wayne Langerholc, Jr. (R-35) offered a comprehensive amendment to Senate Bill 1 in the Senate Appropriations Committee meeting today which amounts to a historic pension reform package.  As amended, SB 1 is projected to save significant dollars over the next 20 years and protect taxpayers from over $6.5 billion in additional payments if state investments fall short of projections.

The bill was hailed by outside analysts as the biggest reduction in taxpayer risk in the country, considerably more than any other state in the nation that has tackled pension reform.

Based upon the provisions of last session’s conference committee report, and like most private-sector pension plans, Senate Bill 1 will move public sector employees away from the fully defined benefit system to a hybrid plan that combines both a 401(k)-style component and a smaller defined benefit component.

 

To be clear, pension benefits of current employees and retirees will not be affected.  The new plan applies to new hires only; however, current employees could choose to opt into the program.

“I’ve been committed to pension reform, and I look forward to being one of the first in line to elect the 401(k)-style defined contribution plan that many of our constituents have,” Langerholc said.  “I fully believe others will do the same.”

New hires would be given a choice of one of three retirement options:  1) a full 401(k)-style option; 2) a defined benefit/defined contribution hybrid with a 1.0 multiplier at a lower employee costs; or 3) a defined benefit/defined contribution hybrid with a 1.25 multiplier at an increased employee cost.

Analysts show that design changes of the proposed plan, on their own, would reduce risk by 60 percent or more, including the employee contribution cost-sharing.

The bill would also create an investment review commission and will challenge the two funds to target at least $1.5 billion in additional fee reductions and savings.

“Today, college graduates who are looking for jobs often admit that they don’t intend to stay in one job their entire career. The inability to transfer any earned retirement from a state job is a deterrent to attracting otherwise qualified, young individuals. Offering this portability is more in line with the vast majority of other employers, and will increase our ability to attract the best and brightest into our state workforce.”

“The time to address the pension spiral is long overdue,” Langerholc said. “I am pleased we can honor our obligation to current retirees, while also honoring and recognizing our obligations to our taxpayers.”

CONTACT:   Gwenn Dando       (717) 599-1164                        gdando@pasen.gov

Senate Passes Greenleaf Legislation to Merge Dept. of Corrections and Board of Probation and Parole

Today, the Pennsylvania Senate passed State Senator Stewart J. Greenleaf’s (R, Montgomery, Bucks) SB 522 and SB 523 to consolidate the Department of Corrections and the Board of Probation and Parole.  The combined agency will be known as the Department of Corrections. 

The consolidation is expected to result in cost savings and increased efficiencies in the operation of our state prisons and parole services. 

The Senate Appropriations Committee estimates an annual cost saving of over $32.3 million by the fifth year.

There is already significant overlap in the operation of the two agencies. Currently, community corrections centers are operated and staffed by the Department of Corrections, but the residents of the centers are entirely parolees. The Board of Probation and Parole assigns institutional parole agents to work inside state prisons.  The Office of Victim Advocate is staffed and funded by both agencies. Given the overlap, it makes sense to consolidate their resources while continuing to allow the Parole Board to make independent decisions regarding parole.

“I introduced this legislation to accomplish two important goals—save precious tax dollars, and continue to improve our corrections system that focusses on the rehabilitation of nonviolent offenders,” said Senator Greenleaf.  “I believe the newly consolidated department will be better equipped to focus on the mission of reducing recidivism and provide a broader range of tools to supervise parolees and guide them towards a law abiding lifestyle.”

SB 522 and SB 523 may now be considered by the House of Representatives.

Contact:

Aaron Zappia 215-657-7700
azappia@pasen.gov

DiSanto Bill to Prohibit Costly Regulations without Legislative Approval Advances

Harrisburg – Legislation sponsored by State Senator John DiSanto (R-15) to prohibit costly government regulations from being imposed without approval by the General Assembly and Governor was reported out of the Senate Rules Committee this week.

Under Senate Bill 561, no regulation with an economic impact or cost to the Commonwealth, to its political subdivisions, and to the private sector exceeding $1 million could be imposed without approval of the General Assembly and Governor.

Currently, the regulatory review process requires the General Assembly to pass a concurrent resolution disapproving a regulation. However, the Governor must sign the disapproval resolution to bar his own agencies from enacting the regulation, the senator noted.

“The process is set up to make it difficult for the General Assembly to protect employers and other citizens from burdensome regulations. It is a priority of mine to restore the constitutional balance and ensure that the people, through their elected representatives, have the final say on legislative intent for economically significant regulations,” said DiSanto.

Senate Bill 651 is expected to be referred to the Senate Appropriations Committee before receiving a vote by the full Senate.

“I am encouraged that this measure is advancing, and look forward to gaining Senate approval and enactment of our entire regulatory reform package,” DiSanto said.

CONTACT: Chuck Erdman cerdman@pasen.gov (717) 787-6801

Senate Passes SB 8 (Asset Forfeiture Reform)

(Harrisburg) – Today, the Senate of Pennsylvania overwhelmingly passed Senator Mike Folmer (R-48) and Senator Joe Scarnati’s (R-25) Senate Bill 8, to reform Pennsylvania’s Asset Forfeiture Law.

“Senate Bill 8 makes significant and unprecedented asset forfeiture reforms,” Senator Folmer said.  “This is a first step towards smarter forfeiture practices and to provide at least some level of due process for property owners.”  

Key Reforms in SB 8 Include: 

  • Higher burdens of proof imposed on the Commonwealth.
  • Protections for third party owners by placing additional burdens of proof on the Commonwealth.
  • Improved transparency in auditing and reporting at both the county and state levels.
  • Specific and additional protection in real property cases by prohibiting the pre-forfeiture seizure of real property without a hearing.
  • Additional procedural protections for property owners, such as returning property to the forfeiture proceeding if there is undue hardship, and an extra level of protection for anyone acquitted of a related crime who is trying to get their property back.

“Today the Senate has advanced Senate Bill 8, which will take a positive step forward to increase transparency of how forfeited funds are used, as well as raising the burden of proof required to seize assets,” Senate President Pro Tempore Joe Scarnati said.  “I am pleased to work with Senator Folmer on this issue, and hope that our colleagues in the House of Representatives will take up this important legislation in the near future.”

“I thank my Senate leadership for helping this important legislation move forward, as well as all the groups who worked tirelessly on these reforms,” Folmer said.

Senate Bill 8 will now go to the Pennsylvania House of Representatives for further consideration.

Listen to Senator Folmer’s remarks on the Senate Floor

Legislators Outline Bills to Hold Regulators Accountable

 

HARRISBURG – Three legislators today in the state Capitol outlined bills they’ve introduced that would hold state regulators accountable.

State Rep. Greg Rothman (R-Cumberland), state Sen. John DiSanto (R-Dauphin/Perry) and state Rep. Dawn Keefer (R-Cumberland/Perry) each have introduced legislation that would insert the Legislature into the regulatory process if a regulation would have a fiscal impact of $1 million or more. 

While the bills outline different processes, each would require legislative approval for any regulation with a fiscal impact of $1 million or more.

“We want the final say on burdensome regulations to be in the hands of the people Pennsylvanians have elected to represent them in the General Assembly,” said Rothman, whose House Bill 911 would send the regulations to the House and Senate, assign them to the appropriate committee and require an informational hearing before the regulations would be voted up or down.  “Expensive regulations are just a hidden form of taxation paid by business owners and the customers they serve.”

“My 35 years of experience as a business owner has shown me that government red tape makes it more difficult to grow a business and create jobs, and I’ve heard the same message repeatedly from other job creators since I’ve been in the Senate,” said DiSanto, whose Senate Bill 561 would require the General Assembly to approve major regulations. “Our current regulatory process stifles the economy and vests too much power in unelected government employees and agencies that lack direct accountability to the people. This is a blueprint for regulatory growth and amounts to laws being crafted without the consent of the governed.”

“Reducing the regulatory burden could help keep existing jobs in Pennsylvania and encourage new employers to open here,” said Keefer, whose House Bill 1237 would require the  Independent Fiscal Office to verify the cost of the regulations and then provide the House and Senate with 30 calendar days or 10 legislative days to vote on the proposal.  If a vote is not taken in that time or the regulation is voted down in either chamber, it would not be implemented.  “My bill would shape our Commonwealth into a better, less bureaucratic state, and would enhance the regulatory review system by giving agencies additional incentives to engage the Legislature throughout the process.”

Carl Marrara, vice president of government affairs with the Pennsylvania Manufacturers’ Assocaition; Anna McCauslin, deputy state director with Americans for Prosperity in Pennsylvania; Suzanne Stoltenberg, Pennsylvania communications director for the National Federation of Independent Business; and James Broughel, a research fellow at the Mercatus Center at George Mason University, attended the news conference to offer their support for the legislation.

The local legislator’s bills each have been introduced and referred to a committee in the House or Senate.

Senate Committee Endorses Collective Bargaining Transparency Measures

 

Senator Aument Listen

 

Senator Martin Listen

HARRISBURG — The Senate State Government Committee approved two bills today that would improve transparency of the process of negotiating the salaries and benefits of government and school employees.

Senate Bill 503, sponsored by Senator Ryan Aument (R-36), would remove the exemption of collective bargaining from the Sunshine Act. Senate Bill 504, sponsored by Senator Scott Martin (R-13), would add collective bargaining to the classification of information that is available to the public under the state’s Right To Know Law.

“Legislators have a responsibility to ensure taxpayers have access to information that allows them to have an open conversation with policymakers throughout the collective bargaining process,” Aument said. “Secrecy breeds distrust and creates a cloud of doubt regarding how taxpayer dollars are being allocated. Opening this information up to the public is the best way to ensure taxpayer dollars are being spent wisely and appropriately.”

Collective bargaining negotiations for public employee salaries and benefits are currently exempt from government transparency laws. Twelve states already require access to collective bargaining of public-sector employees. The Senate approved similar legislation during the 2015-16 Legislative Session.

“In my experience in local government, the process works best when the public is involved and knows what taxpayer resources are being offered by their elected officials and demanded by employee bargaining units,” Martin said. “Contract negotiations can have a significant impact on taxpayers, not only in the amount of money deducted from their paychecks, but also in the form of strikes and other disruptions in the lives of students, parents, employees and citizens who rely on government services. Shining a light on that process will only improve the final product.”

Both bills were sent to the full Senate for consideration.

CONTACT:  Stephanie Buchanan (717) 787-4420 (Senator Aument)

Terry Trego (717) 787-6535 (Senator Martin)