Alternative Pension Bill Offers More Savings, But Also More Risk
Another proposal to overhaul the state's public pensions is officially in the mix.
The measure, unveiled last fall, received a thorough vetting from the Public Employee Retirement Commission (PERC) last Wednesday, a necessary step before it receives any kind of vote from state lawmakers.
The analysis found the plan could save the commonwealth about $30 billion over 30 years.
The proposal would enroll future state and school employees in a "cash balance" pension, effectively cutting retirement benefits in half, compared to public workers' current plans. But even those benefit changes make up a small portion of the projected savings, most of which come from borrowing using a maligned maneuver called a pension obligation bond.
"Without the bond, there's no point," said Jim McAneny, PERC's executive director.
Democrats have been calling for borrowing to try to generate returns that could be used to pay down the state's $50 billion-and-growing pension debt (also called an unfunded liability). But pension obligation bonds are seen as exceedingly risky. They have left many government entities with unfavorable bets and more debt, not less. Such a move is also strongly opposed by the Corbett administration.
State lawmakers outlawed pension obligation bonds in 2010.
Sponsor Rep. Glen Grell (R-Cumberland) said his measure still needs some tweaking, but he thinks it's worth lawmakers' consideration.
"I think this does advance the conversation," Grell said.
He acknowledged the paltry savings that would come from even the sizable reductions to future public retirement benefits.
"There is very little that we can do to solve this unfunded liability problem just by tinkering with new plan design for future members," he said. "So in my view we have to get serious about attacking the unfunded liability and doing that in a serious way."
A different overhaul proposal favored by Gov. Tom Corbett's administration would only affect plan design — that is, retirement benefits. Critics have said the changes would amount to about a 40 percent reduction to future public workers' retirement benefits. PERC estimated they could save $11 billion over 30 years. That measure has stalled in the state Legislature for months.