Essential Pittsburgh
4:38 pm
Thu June 19, 2014

A Hybrid Approach to Pennsylvania Pension Reform

Credit 90.5 WESA

Pennsylvania Governor Tom Corbett recently aligned with State Representative Mike Tobash and other legislators who have developed a new way to administer public employee pensions in an effort to save taxpayer money.

However, a report from left-leaning Keystone Research Center economist and executive director Stephen Herzenberg says,

"The proposed plan would make little progress reducing the state’s pension debt, while forcing Draconian benefit cuts on future teachers, cafeteria workers, nurses, and state employees."

The Corbett-Tobash proposal would replace Pennsylvania’s largest pension plan with this new hybrid system for all new state and school employees entering the workforce.

Herzenberg and Rep. Tobash both discussed the new approach and how best to tackle the state pension crisis.

Rep. Tobash explained how this pension plan would work for new employees, with a “defined contribution,” meaning a certain percentage of money would be set aside yearly for the employee, from the company.

“At a limit of 25 years, so after 25 years, you’d be 'fully earned,' under the defined benefit portion of the plan, so any salary that accumulates over a 25 year period would be subjected to defined contribution. We’ve also added an element of defined contribution from the first dollar of pay, and again that’s for new employees coming into the commonwealth. And there would be a one percent deferral that would go into the DC, and then the state would match it with a half of a percent, so we establish the account early.”

Herzenberg opposes these pensions changes, and he said even Governor Corbett has little faith in Rep. Tobash’s plan for reform.

“The governor’s own plan, and I would say Rep. Tobash’s plan, are really a case of ‘bait and switch.’ The case for pension changes, based on a debt problem, then offer so called ‘reform proposals’ that don’t address the problem significantly or make it worse! Even the governor admitted about a week ago that Rep. Tobash’s plan doesn’t make a lot of progress on the debt, and that’s before you get to a series of costs that the Representative’s plan would have.”

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