PhillyDeals: Plan to stall growing gap in state pension
How to get out of a $50 billion hole? First, stop digging, reasons State Rep. Mike Tobash (R., Pottsville).
How to get out of a $50 billion hole?
First, stop digging, reasons State Rep. Mike Tobash (R., Pottsville).
Tobash has a plan - a moderate plan, by today's standards - to stall the growing gap between the billions Pennsylvania's politically appointed pension trustees have invested, in hopes the money will magically grow very fast, and the tens of billions actually needed to keep future pensions flowing to ex-teachers, prison guards, legislators, and other public servants.
This gap between assets and liabilities, which totals about $50 billion for the combined State Employees (SERS) and Public School Employees (PSERS) Retirement Systems, burns a hole in every Pennsylvanian's wallet. That's because state law requires that the General Assembly and local school districts pay more into the pension plans each year, until the gap starts closing.
Tobash would cap pensions for future hires at $50,000 a year. There are, indeed, assistant principals, state college football coaches, veteran legislators, and others who are eligible for twice that, or more, per year for life.
He would also curb pension payments to people before they turn 65 - except state troopers, who don't get Social Security and would still be able to collect at 60.
And Tobash would add a 401(k)-type, private-sector-style, U-Pick-It savings plan with a partial taxpayer match for any employee willing to save extra, and risk stock-market losses, in hopes of earning retirement pay beyond that $50,000 cap.
Tobash, a professional seller of insurance and investments, won an early-stage victory last week when the bipartisan state Public Employees' Retirement Commission backed his bill, swayed, in part, by calculations that it would keep the pension gap from growing by an additional $15 billion over the next 30 years.
He seems to have won another struggle, with some fellow Republicans, when his plan was grafted onto House Bill 1353, which earlier would have forced all state employees into a U-Pick-It scheme.
Tobash acknowledges that his plan doesn't pay down the $50 billion shortfall; it only keeps it from getting worse. "That would be a magic trick," he told me, to cut the deficit without either paying in even more money, which Gov. Corbett says we can't afford, or cutting the pensions today's workers have already been promised, which is about as illegal as retroactively cutting workers' pay.
In short, the pension debate these days is between the cut-it-alls, the cut-somes, and the don't-cut-just-hope people, those Democrats who hope the problem will solve itself if the strange, expensive investments favored by Pennsylvania pension boards shoot up in value, or they manage to retire onto their own state pensions and make it someone else's problem.
Nobody seems to be arguing for the kind of solution once pushed by scholars such as former Notre Dame University professor Teresa Ghilarducci, who argued for expanding aging pension plans by adding young workers from other employers, and their dollars, instead of cutting, cutting, cutting.
Maybe the state's lame-duck treasurer, Rob McCord, could advocate such a scheme, as he did when he was first running for public office, long before he was creamed in the recent gubernatorial primary.
Tobash is skeptical. "The theory, 'Let's get more bodies in,' has got some validity," he told me. "But also more risk. Tell me the rate of return you expect, the rate of mortality, and the propensity of our legislature to [delay payments, inflating long-term costs], and I'll tell you what we can afford."
Meanwhile, Tobash is pushing his bill to ease the public burden by capping guaranteed pensions for future hires. "This," he told me, "is a commonsense approach."
How to get out of a $50B pension hole? Stop digging, a legislator says. Philly Deals, C4.