In the guise of a solution, Gov. Corbett's pension reform plan would make the problem worse. It would weaken employee retirement funds, eventually cost taxpayers $179 million more a year, and add $5 billion to unfunded pension liabilities by 2019, and even more afterward.
Those aren't the only reasons the legislature should reject the governor's plan. It also imperils the state's finances, and its proposed cut to current employees' benefits would not survive a legal challenge.
The state caused the pension problem by increasing employee benefits during the boom years while reducing the government's contributions to the pension funds. (State and school employees, it must be noted, never stopped contributing an average of 7 percent of their paychecks to the funds.) Now Corbett wants to balance the state budget by reducing the government's contributions for the next five years, which is the same reckless policy that deflated the funds in the first place. His timetable coincides with his prospective tenure in office, making it sound suspiciously like a political trick.
The governor also says he wants all new state and school workers to enroll in a 401(k)-like retirement plan starting in 2015. Although such benefits are considered more sustainable, the change would not address the current liability, and it would reduce contributions to the existing plans.
Two years ago, the legislature passed Act 120 to prevent a fivefold increase in the government's contribution to state and school employee pension plans. The law lowered state pension costs by reducing new employees' benefits by 20 percent, extending the vesting period, and raising the retirement age. It also forces employees, the state, and school districts to pay more into the funds when the market dips.
Unfortunately, these sacrifices were not enough, and the pension plans are facing $47 billion in unfunded liabilities. But to fix pensions, Corbett must build on Act 120 instead of ignoring it.
The governor has already tried to balance his budgets by cutting aid to sick children and frustrating the hungry and unemployed with needless bureaucratic mazes. Now he is threatening to raid already inadequate pension funds in what should be seen as an affront to anyone who cares about the state's fiscal stability or its obligation to employees.