Corbett's pension plan costs taxpayers more
Even after taking three months to modify and find legislative sponsors for his pension proposal, Gov. Tom Corbett's plan is still more costly to taxpayers, dramatically reduces retirement payments for teachers, nurses, and law enforcement officers, and is unconstitutional.
PSEA President Mike Crossey said that the governor's pension plan puts taxpayers on the hook for increased, long-term costs.
“The only news to report on the governor's plan is that it is as bad today as it was when he first announced it in February,” Crossey said. “It's a ‘lose-lose' proposition based on unattainable assumptions that will cost taxpayers more in the long run.”
The governor's plan to force new employees into a risky defined contribution system will cost taxpayers nearly twice as much. Under current law, the employer normal cost of benefits for new employees is only 2.2 percent of salary. The governor's plan would nearly double that rate to 4 percent of salary.
Studies conducted on similar plans indicate that the governor's assumptions about future investment earnings from this defined contribution plan are unattainable for a closed fund.
“The governor wants to run two pension systems for the price of one, but it can't be done,” Crossey said. “This will cost taxpayers more and won't do anything to clear the pension debt. Plans like this are what caused the problem in the first place.”
Crossey added that the governor continues to cling to his plan to reduce future benefits for current employees, an approach that Pennsylvania's Supreme Court determined was unconstitutional nearly thirty years ago and that legislators have largely dismissed as unrealistic.
“It's simply irresponsible to propose something that is clearly unconstitutional,” Crossey said.
Crossey also said that the Pension Reform law of 2010 is the best way to resolve the pension debt that accumulated between 2000 and 2010 when employers took a decade-long holiday from making proper contributions to the retirement systems. That law reduced benefits and increased pension contributions for new public employees, raised the retirement age, and will save taxpayers $24.6 billion over 30 years.
“In 2010, the General Assembly found a real solution,” Crossey said. “The governor's plan is no solution at all. It just creates new problems for taxpayers that the General Assembly will need to solve down the road. It's a bad plan and bad policy.”
Learn more at www.psea.org/pensions.