Government
12:41 pm
Mon August 20, 2012

House Lawmakers Review Pension Reform Proposals

http://2cccd5dfe1965e26adf6-26c50ce30a6867b5a67335a93e186605.r53.cf1.rackcdn.com/Penns Budget Wrap_Mary Wilson_SOC.mp3

A joint panel of the state House Finance and State Government committees has kick-started the Legislature’s discussion of pension reform.  Gov. Corbett has highlighted the issue as the number one legislative priority this fall, and the opening salvo of what’s expected to be a protracted debate began this week, as lawmakers tried to wrap their heads around the complicated mess of problems plaguing the state’s pension system, like a down economy and shortsighted underfunding.

Most of the testimony revolved around proposals to switch state and public school employees to a 401(k)-style retirement plan, in which it’s their contribution that is locked into place, instead of their benefit.

Andy Biggs, a scholar with the conservative American Enterprise Institute, said he favors defined contribution plans because they don’t hang the funding of a pension on an optimistic view of the economy or a political decision.  

“These are interactions,” said Biggs.  “So, the economic and financial factors, and the funding rules, and human nature – and human nature is, if you can take a vacation from funding, you will do that.”

Testimony from a liberal-leaning group argued that switching to defined contribution plans could pinch the pocketbooks of public employees.  Steve Herzenberg, director of the Keystone Research Center, said such a plan costs more to manage.  He did acknowledge that it ultimately saves employers money – that’s why it’s the favored retirement plan of private companies, he said.  But he warned that public workers without any education beyond high school will be the most vulnerable to drastic reductions in retirement benefits under a change in their retirement plans.

“You’ve taken the once place in our economy where food service workers and bus drivers and school secretaries can have a secure retirement – you’ve denied them that opportunity and you’ve transferred the money to financial services firms,” said Herzenberg.  Later, he did agree with the sponsor of a bill to switch the public pension plans that the proposed rates of contributions by both the employer and employees would result in a decent retirement for the employee. 

Herzenberg’s concerns were echoed by House Finance Committee’s ranking Democrat, Phyllis Mundy (D-Luzerne), who said the discussion of pension reform has been marked by a lack of empathy for the people most affected by it – state and public school workers.

“Their retirement security, their level of income in retirement,” Mundy said.  “And if people have no money to spend, whether it’s in retirement or as employees, that affects the economy because there are no goods and services being purchased.”

But the House State Government Committee’s Republican chairman, Daryl Metcalfe (R-Butler) said his empathy is for the people who have to foot the bill for the pension plans.  “I’m looking out for their interest, for the taxpayer’s interest,” said Metcalfe.  “They’re being asked to pay too much to receive far too little.”