State Pensions
8:01 am
Tue February 4, 2014

PA Auditor General to Governor: Fully Fund Pensions, Cut Corporate Tax Breaks

Pennsylvania Auditor General Eugene DePasquale said at a news conference Monday that he’ll soon begin an audit of the state’s Department of Community and Economic Development.

DePasquale said he’s looking for subsidies and tax breaks for corporations that don’t positively impact middle class job growth. He said the state should eliminate such subsidies and tax credits before touching “one dime” of public employee pension funds.

“That is an item that I think needs to be part of this discussion,” DePasquale said. “It shouldn’t just be state worker pensions that are always, every year being put on the chopping block by the administration.”

It has been more than a decade since Pennsylvania fully funded its pension system. According to a new report from the nonprofit policy research center Good Jobs First, pension costs for 2014-5 total $1.4 billion. The report, titled “Putting State Pension Costs in Context,” analyzed pension costs and corporate tax breaks in the 10 states where the public pension controversy is most heated: Pennsylvania, Arizona, California, Colorado, Florida, Illinois, Louisiana, Michigan, Missouri and Oklahoma.

“What we found was striking,” said Philip Mattera, research director at Good Jobs First, which receives some funding from labor unions. “In every one of the 10 states, current retirement costs were far outweighed by the cost of corporate subsidies, tax breaks, and tax loopholes. In Pennsylvania, the annual subsidy and tax break cost turned out to be $3.9 billion.”

The report excluded pension costs associated with past underfunding; Mattera said “that’s a separate issue.” However, he said that if those costs are included, that only brings the state’s pension obligation to $2.8 billion, still less than the report’s estimate for corporate tax breaks and subsidies.

Stephen Herzenberg, executive director of the left-leaning Keystone Research Center, said the rhetoric around inflated pensions is misleading.

“The real pension issue is the failure to make contributions over the past decade,” Herzenberg said. “Year after year, the state finding one or another reason to not put in the required contributions. When you do that for 10 years in a row, you get a funding problem.”

Gov. Tom Corbett is expected to propose additional pension cuts in his 2014-15 budget, which will be released Tuesday morning.