Keystone State Pension Reform Still Stalled

Proposals to reform Pennsylvania’s pension system have come from both sides of the aisle, but neither has made much traction with the opposite side.

H.B. 1499, which State Rep. Mike Tobash (R-Schuylkill Haven) introduced earlier in August, has generated opposition. Ray Harmon, Government Affairs Counsel for NTSA, reports that the Citizens Alliance of Pennsylvania (CAP) is critical of the plan and is especially concerned that the plan would not realize significant savings until 15 years after enactment, by which time when they say the retirement systems will already be insolvent.

CAP suggests instead that the Assembly consider H.B. 900, which would require substantial pay-down of the unfunded liability. John D McGinnis (R-Altoona) introduced the bill on May 13, 2015. It is before the State Government Committee of the House of Representatives.

Harmon reports that Gov. Tom Wolf (D) may be reconsidering his position opposing any change to employee pension plans. Wolf has suggested that he could support a stacked-hybrid plan similar to the Tobash bill but that rather than having a demarcation point of $50,000 in annual salary, he would support a plan that begins a defined contribution plan at $100,000. Harmon notes, however, “It is not clear whether this means that people making $100,000 would be solely covered by a DC plan or that any amount over $100,000 in annual salary would be DC with the majority of the employee's salary covered by the DB plan.”

Apparently, Harmon adds, no supporting documentation was provided of Wolf’s claim that this change would save more than the plan he vetoed in June. In addition, the governor is still seeking a repeal of the law prohibiting pension obligation bonds and has lowered his asking amount from $6 billion to $3 billion.

And according to WITF online, Wolf has made a proposal to scale back retirement benefits for state and school workers. The plan would:

• preserve pension benefits for most of those employees;

• provide for a 401(k)-style benefit for the employees with the highest incomes; and

• limit the extent to which workers can boost their payouts in their last few years as employees.

The state would turn to a pension obligation bond to help fund the plan. Wolf says the proposal would reduce Pennsylvania’s $50 billion pension debt by $17 billion. But the Wolf administration would only pursue the plan in exchange for Republican support for its proposal to increase education funding by $400 million.

Republicans in the Assembly appear unimpressed. According to WITF, Drew Crompton, chief counsel to Senate President Pro Tem Joe Scarnati (R-Brockway), Wolf’s proposal would be a non-starter with the Senate’s Republican majority.