Pennsylvania Gov. Tom Wolf (D) on July 9 vetoed the pension reform bill, Senate Bill 1. State Sen. Jake Corman (R-Bellefonte) had introduced the measure, which was designed to modernize Pennsylvania’s retirement systems in order to update the funding, sustainability and practices followed by the two main state pension funds.
Senate Bill 1 included provisions that would have enrolled all new state and public school employees, as well as General Assembly members, in a mandatory defined contribution plan. It also would have reformed and updated — but not reduced — benefits for current state and public school employees. And it would have created a Public Pension Management and Asset Investment Review Commission, which was to have studied, published findings and made recommendations to the General Assembly and the governor.
Among the reasons for Wolf’s opposition, reportedly, is his concern that the bill would impair the state’s ability to attract employees. In his veto statement, Wolf said:
I understand the need for pension reform, but this legislation provides no immediate cost savings to taxpayers and does not maximize long-term savings for taxpayers. We need pension reform that works. There are provisions within this legislation, which as part of a comprehensive pension proposal I could support; however, Senate Bill 1 does not address the problems facing our pension system comprehensively and fairly.
The plan I delivered to the General Assembly would save at least $10 billion, while at the same time ensuring that the commonwealth will make all actuarially required contributions to fund our future pension obligations and reducing the burden placed on the commonwealth and school districts in the short term. Since my budget proposal I have found and shared an added $7 billion in savings, a total of $17 billion in savings to our retirement systems, which I have communicated to the General Assembly. Furthermore, the plan I proposed would reduce the over $700 million in fees paid annually to Wall Street firms to manage our investments, Senate Bill 1 does not address these excessive fees.
This legislation was pushed through without negotiation by Republicans along with an unbalanced budget, and this legislation produces no savings to our deficit in the next fiscal year. We need a comprehensive agreement on the issues facing Pennsylvania including education funding, the need for a commonsense severance tax on natural gas, balancing our budget for the long term, and pension reform.
Furthermore, during my consideration of this legislation, it became clear that this legislation violates federal tax law as it would be considered an impermissible cash or deferred arrangement (CODA). In addition, the bill forces newly-hired employees to pay down the unfunded liability of existing pension plans, caused by years of government failure to make necessary payments, while denying those new employees the full benefit of their contributions.
I urge the General Assembly to resume negotiations and work to enact a comprehensive plan that will balance our budget, invest in our schools, make oil and gas companies pay their fair share, and solve Pennsylvania's pension problem.
Ray Harmon, Esq. is government affairs counsel for NTSA.
Senate Bill 1 included provisions that would have enrolled all new state and public school employees, as well as General Assembly members, in a mandatory defined contribution plan. It also would have reformed and updated — but not reduced — benefits for current state and public school employees. And it would have created a Public Pension Management and Asset Investment Review Commission, which was to have studied, published findings and made recommendations to the General Assembly and the governor.
Among the reasons for Wolf’s opposition, reportedly, is his concern that the bill would impair the state’s ability to attract employees. In his veto statement, Wolf said:
I understand the need for pension reform, but this legislation provides no immediate cost savings to taxpayers and does not maximize long-term savings for taxpayers. We need pension reform that works. There are provisions within this legislation, which as part of a comprehensive pension proposal I could support; however, Senate Bill 1 does not address the problems facing our pension system comprehensively and fairly.
The plan I delivered to the General Assembly would save at least $10 billion, while at the same time ensuring that the commonwealth will make all actuarially required contributions to fund our future pension obligations and reducing the burden placed on the commonwealth and school districts in the short term. Since my budget proposal I have found and shared an added $7 billion in savings, a total of $17 billion in savings to our retirement systems, which I have communicated to the General Assembly. Furthermore, the plan I proposed would reduce the over $700 million in fees paid annually to Wall Street firms to manage our investments, Senate Bill 1 does not address these excessive fees.
This legislation was pushed through without negotiation by Republicans along with an unbalanced budget, and this legislation produces no savings to our deficit in the next fiscal year. We need a comprehensive agreement on the issues facing Pennsylvania including education funding, the need for a commonsense severance tax on natural gas, balancing our budget for the long term, and pension reform.
Furthermore, during my consideration of this legislation, it became clear that this legislation violates federal tax law as it would be considered an impermissible cash or deferred arrangement (CODA). In addition, the bill forces newly-hired employees to pay down the unfunded liability of existing pension plans, caused by years of government failure to make necessary payments, while denying those new employees the full benefit of their contributions.
I urge the General Assembly to resume negotiations and work to enact a comprehensive plan that will balance our budget, invest in our schools, make oil and gas companies pay their fair share, and solve Pennsylvania's pension problem.
Ray Harmon, Esq. is government affairs counsel for NTSA.
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