|
For Immediate
Release
9/29/11
Senate Finance Committee Hearing
Examines Pension Issues, Possible Solutions
HARRISBURG – The Senate Finance Committee took a closer look at the financial
challenges of state and municipal pension systems and gathered suggestions for
possible solutions during a public hearing Wednesday.
"There is a great deal of concern regarding the ability of the Commonwealth
and local school districts to meet rising pension obligations in future years,"
said Senate Finance Committee Chairman Sen. Mike Brubaker (R-36). "This hearing
gives us an opportunity to determine the extent of these challenges and to
gather information we can use to work toward solutions."
The committee heard from testifiers about the pros and cons of alternatives
that include defined contribution plans, hybrid plans, and cash balance plans.
According to testimony from several participants, the unfunded liabilities of
the major state-run pension systems present a significant obstacle to reducing
pension costs because those liabilities must be paid even if a switch is made to
a different type of plan.
Public School Employees' Retirement System (PSERS) Executive Director Jeffrey
Clay and State Employees' Retirement System (SERS) Director of Member Services
David Durbin reported a combined total of more than $29 billion in unfunded
liabilities in the two pension funds. They noted that the unfunded liabilities
have been building for some time due to persistent underfunding of the systems,
benefit increases and market downturns. Under current contribution rates, Clay
said unfunded liabilities for PSERS alone could grow to $45 billion by 2018.
Durbin and Clay said that the SERS and PSERS funds could not pay down
existing unfunded liabilities through investment returns alone and added that
significantly higher levels of funding would be required to keep the funds
solvent. They said that any potential one-time cash infusions would need to be
massive to make a difference and that cash infusions are not likely to be a
viable solution on their own.
Public Employee Retirement Commission (PERC) Executive Director James McAneny
said that municipal pension systems did not suffer as much as state systems in
the aftermath of the market downturn in 2008 due to requirements for those plans
to be fully funded. McAneny added that the cost of switching from the state's
current defined benefit plan to the defined contribution plan favored by many
private businesses would be prohibitive due to the current unfunded liabilities
in the pension systems.
Pennsylvania Municipal Retirement System (PMRS) Secretary James Allen noted
that the system manages both defined benefit and cash balance plans for local
governments. Allen discussed asset allocation and the differences between the
six percent assumed rate of return for PMRS in contrast to the higher rates of
return assumed by PSERS and SERS. He described the six percent assumption as
conservative and suggested that it has worked for the system based on the
requirements of its governing statute.
Video and audio of the hearing is available online at senatorbrubaker.com.
Brubaker said he intends to solicit additional input from experts and members
of the general public in future public forums.
CONTACT:
Mark Ryan
(717) 787-4420
|
