Due to Pennsylvania’s public employee pension crisis, the state budget has been hemorrhaging money for nearly a decade. Over the past several weeks, lawmakers and Governor Wolf took an important step to stop the bleeding by creating a new system of retirement benefits for school and state employees that makes sense in today’s economy, and for today’s workforce.
Rising pension costs have put an extreme amount of pressure on school districts and state budgets, resulting in higher property taxes and less money for worthwhile programs. The scope of this problem is staggering.
Unfunded liabilities in the state’s two largest public pension systems now total more than $60 billion. For the sake of comparison, that is almost double the amount of state taxpayer dollars required to fund the entire state budget. SERS and PSERS employer contributions have skyrocketed from $1 billion in Fiscal Year 2010-11 to more than $6 billion for Fiscal Year 2017-18.
The bipartisan pension reform measure that was signed into law this week creates an updated retirement system for newly hired employees that mirrors the benefits offered by most employers in the private sector. Perhaps more importantly, it removes a large portion of the risk endured by taxpayers during an economic downturn. It is estimated the bill will save at least $5 billion, but that total could quickly climb to $20 billion or more if state retirement investments continue to fail to reach projections.
While a high priority has been placed on protecting taxpayers, the plan also is sensitive to the needs of public-sector employees. Our economy is changing, and it is now rare to see employees spending 20, 30 or even 40 years in the same job. The new system will ensure employees can explore different career options without jeopardizing a comfortable retirement. In fact, the new state retirement benefit provides better security in retirement than most in the private sector.
The final product of our concerted pension reform efforts is a plan that accomplishes more than any other state in the nation – a monumental improvement that could serve as a national model for other states struggling with pension costs.
Too often in Harrisburg and in Washington, lawmakers look to fix the problems of today without looking to what might happen tomorrow. The modernization of Pennsylvania’s pension systems bucks this trend and sets our commonwealth on a more sustainable path for the future.
CONTACT: Heather Cevasco (215) 489-5000