Coming cost increases forcing PA officials to plan ahead this year
By Eric Boehm | PA Independent
HARRISBURG — Reforming Pennsylvania’s pension plans is the only option.
“Either we’re going to have to increase spending dramatically, or cut spending dramatically or reform the pension system,” said state Sen. Jake Corman, R-Centre, chairman of the Senate Appropriations Committee, on Tuesday.
“The tax increases … would be unpalatable and the cuts in spending would be unpalatable, so reform is my preferred choice,” Corman said.
Taxpayer contributions to the State Employees Retirement System, or SERS, and Public School Employees Retirement System, or PSERS, will climb from $1.6 billion in next year’s budget to more than $4 billion in 2016 and as high as $10 billion by 2035, according to projections from the two pension funds.
Corman said the pension situation is expected to play into this year’s budget discussion because of the coming increase, mirroring comments made in the past month by Gov. Tom Corbett, who has likened the pension crisis to a "Pac-Man" eating away at revenue that could be spent elsewhere in the budget.
Since most of the existing pension costs resulted from benefits state and public school employees have earned, any reforms would do little to solve the immediate crisis, but could defuse costs in later years by changing benefits for future employees.
Still, Corbett and Corman said they do not have a specific plan on how to reform the system at this time.
“We’ll have to wait and see where the body is,” Corman said, referring to the General Assembly.
Many conservatives have advocated for a change from the existing defined benefit plan — in which pension benefits are guaranteed as a formula of years worked and salary — to a defined contribution plan where workers can invest a portion of their pay in a retirement account, similar to a 401(k) plan in the private sector.
