State lawmakers debated further pension reforms Tuesday, focusing more so on bringing down long-term costs for future employees as opposed to handling the looming multibillion-dollar increases in costs the state will incur to pay down its debt.
Some of the latest bills introduced would implement a program similar to a 401(k) in the private sector. Others deal with contribution rates.
During the hearing Rep. Eli Evankovich (R-54th) acknowledged the separate short-term and long-term tasks facing the state.
“It’s not meant to be a touchdown pass. It’s meant to be a five-yard completion. It’s meant to be some step forward to addressing those future costs. And, until we find the ultimate comprehensive solution, until we can figure out a way to address that long-term, we have to take some step forward,” said Evankovich.
Estimates from the two agencies put the combined debt between the State Employees Retirement System and the Public School Employees Retirement systems at about $41 million.
“They take the view if we just do further pension reform that solves the problem. And, that is not the case,” said Jeffrey Clay, executive director of the Public School Employees Retirement System.
According to documents provided by PSERS, the state’s contribution to pensions will increase from 8.65 percent of payroll in 2012 to 25.56 percent of payroll in 2016.
“They’re not paying what they really should pay even now. They’re still underfunding the system,” said Clay.
Michael Crossey, president of the Pennsylvania Education Association, pointed out significant pension reform occurred in 2010. He said the main issue dealing with costs now is that the state underfunded the pension system for the last decade.
“It’s paying off the debt. It’s like not paying off your credit card for 10 years,” said Crossey.
Rep. Glen Grell (R-87th) has been studying the pension issue for several years.
He said the likely fallout from this situation will include increased local taxes by school districts and municipal governments as well as further cuts in state programs.
Grell said, “We’re hoping for increased revenue through economic growth, but absent that sure, we have to pay our debt service, we have to pay our pension obligations, things like that before we spend money on non-essential services.”
Citing pension concerns, Moody’s Investors Service downgraded Pennsylvania’s debt rating by one notch from Aa1 to Aa2.