WILKES-BARRE — The state senators representing parts of Luzerne and surrounding counties approved legislation supported by Gov. Tom Wolf to overhaul Pennsylvania’s two debt-saddled pension systems.
Monday’s 40-9 vote in the Senate is expected to be followed by House approval this week to send the bill to Wolf’s desk.
Sens. John Yudichak, D-Plymouth Township, John Blake, D-Archbald, and John Gordner, R-Berwick, joined Lisa Baker, R-Lehman Township, in voting for the legislation that covers the State Employee Retirement and Public School Employee Retirement systems.
“This reform plan is a substantial step toward reestablishing pension fund stability,” Baker said. “By supporting change, we recognize that the existing pension structure overburdens taxpayers without relief in sight.”
Baker said most analysts have come to the conclusion there is no longer any reasonable possibility the two systems can produce earnings sufficient “to correct a decade-and-a-half of serious under-funding of public pensions.”
According to an Associated Press story, Wolf’s office says he supports the bill’s goals of paying down the pension debt on the current schedule, reducing pension fund investment fees and shifting investment risk away from taxpayers.
The AP story said:
• The bill would slash the traditional pension benefit for most state government and public school employees hired after 2019, and introduce a 401(k)-style benefit.
• Actuaries say the reform wouldn’t reduce near-term pension obligations for the state and school districts. But it provides a smaller retirement benefit for new system members.
• The bill wouldn’t reduce benefits for current public employees or retirees.
• The roughly $60 billion projected debt in the two pension systems is attributed to the benefits of current and retired employees and will take more than two decades to pay down, according to estimates by the pension systems.
• The debt stems from years of lawmakers and governors deferring payments into the system and approving pension benefit increases, plus disappointing investment performances.
Baker said there are several compelling reasons for changing the structure of the statewide pension systems for state workers and educators.
“There is the well-documented problem of the considerable unfunded liability, and the consequent budget distress caused by rising required contributions,” Baker said. “There is the sharp contrast with the benefits available under most prevailing pension plans for private sector workers. And there is the growing trend of increasing mobility on the part of modern workers.”
Yudichak, long an advocate of pension reform, said he voted in favor of the Senate’s pension reform bill because it responsibly protects the retirement security of state employees, while reducing the financial risk of taxpayers by saving more than $1 billion over the next several decades.
“Pension reform, embodied by SB 1, will allow Pennsylvania to invest budget savings into rebuilding our infrastructure, creating jobs, and protecting the environment,” Yudichak said.
Yudichak said he voted against the pension increase of 2001 that precipitated the multi-billion-dollar pension crisis facing the state. And he supported Act 120 pension reforms that rolled back benefits and increased the retirement age to stem growing unfunded pension liabilities.
“With the passage of SB 1, we are now on a long-term, responsible pension fund trajectory that is fair to state employees and protects Pennsylvania taxpayers with public retirement options more aligned with the private sector,” Yudichak said.
Wolf said the pension compromise achieves his foremost goals all while providing workers with a fair retirement benefit.
“Achieving this compromise will provide employees with the fair retirement that they deserve, while also providing long-term relief to school districts, ensuring more future state dollars go directly into the classroom,” the governor said.
Reach Bill O’Boyle at 570-991-6118 or on Twitter @TLBillOBoyle.