Pension reform
10:00 am
Thu June 5, 2014

PA House Leader Leaves Door Open to Defer Pension Payments

The Pennsylvania House Majority Leader isn’t ruling out a move to trim the state’s scheduled payments toward its pension debt.

“There’s not an appetite to reduce the collars (scheduled payments) in the House,” said Representative Mike Turzai (R-Allegheny), as he stressed the need for an overhaul to pension benefits for future employees.

Pennsylvania’s unfunded pension obligation is approaching $50 billion. That shortage for school and state worker pensions has grown, in part, due to underfunding in years’ past. Governor Corbett has proposed to reduce the scheduled payments toward that debt this year.  

“It’s kicking the can down the road,” said Turzai. He declined to elaborate on his way out of a press event where House Republicans made the case for a plan to largely reduce benefits for future state and public school hires.

That plan, offered by Rep. Mike Tobash (R-Schuylkill), would enroll workers in a so-called hybrid retirement system: part traditional pension (defined benefit) and part 401(k)-style plan (defined contribution).

“The bottom line is that for a lot of employees -- sort of on order of magnitude, about half -- the cuts would be 40 percent or more,” said Stephen Herzenberg an economist and head of the left-leaning Keystone Research Center.

But Tobash said his proposal would give workers a good benefit while also being affordable for the commonwealth.

“It’s not an entitlement that everyone retires at age 50,” Tobash said. “It sounds nice, and if that has become the expectation in the commonwealth of Pennsylvania, I can tell you that, that’s why we can’t afford this.”

Supporters note that even if the overhaul is passed, the state will still have to face down its existing pension debt.

“This is a separate issue entirely,” said Rep. Chris Ross (R-Chester), of overhauling pension benefits. “We have got to change the trajectory of where we’re going on this as soon as possible, or it’s going to be disastrous for the commonwealth. We will still have a budget issue. We still have to solve the budget.”