Corbett calls for pension overhaul
BY PETER JACKSON, Associated Press
HARRISBURG -- Gov. Tom Corbett laid out a strategy Tuesday for reining in pension costs for Pennsylvania state and school employees that would reduce future benefits for current workers and require new hires to participate in a defined-contribution plan.
In his annual budget speech, the Republican told lawmakers that resolving problems that have saddled the two major pension funds with a combined $41 billion unfunded liability would be "the single most important thing we do for decades to come."
"The entire system of state pensions has become a mountain of debt, and the avalanche could bury our economic growth, swallow up benefits for our elderly, education for our children and transportation for our economy," Corbett said.
But speedy approval appeared unlikely, with legislators from both parties questioning the constitutionality of a central part of the governor's plan and unions vowing to fight in court if it is approved.
"He's asking the General Assembly to pass unconstitutional changes to public employee pensions as a fundamental part of his budget, which is just bad policy. You can't spend money you don't have and may never be able to get," said Wythe Keever of the state's largest teacher union, the Pennsylvania State Education Association.
Corbett proposed three changes to the Public School Employees' Retirement System and the State Employees' Retirement System, which together include more than 800,000 active and retired members. Benefits for people who already are retired would not be affected.
One proposal would immediately cut future benefits for current employees by reducing the "multiplier," a percentage applied to an employee's years of service and final average salary to calculate pensions, typically from 2.5 percent to 2 percent. For example, someone with 20 years of service and a multiplier of 2 percent is eligible for a pension equal to 40 percent of his or her final average salary.
Under Corbett's proposal, employees could retain the higher multiplier by paying higher contributions.
For new hires, Corbett wants mandatory enrollment in a 401(a) defined-contribution retirement savings plan. They would have to contribute at least 6.25 percent of their salary and employers would make a 4 percent contribution.
Corbett's third proposal would limit annual increases in the employers' -- taxpayers' -- share of funding the pension funds to 2.25 percent of payroll, instead of the 4.5 percent that is scheduled to take effect next year.