Allentown Morning Call
Budget Secretary Charles Zogby’s office released its first comprehensive overview of the state’s dire public pension crisis this afternoon, concluding that if the problem remains unaddressed the “state’s general fund budget is on very predictable path that will force a choice between either fully funding pension obligations or making cuts to the core functions of government.”
“With a clear understanding of the crisis and the challenges we confront, it is imperative that Pennsylvania find a workable solution,” the budget czar said in a statement.
The report contains much that is familiar if you’ve been paying attention to the ongoing debate over how Pennsylvania will meet its obligations to current and upcoming public employement retirees. Namely, that the state faces a $41 billion unfunded liability in the pension system that’s due to expanded employee benefits and habitual underfunding from the state and school districts.
The State Employees Retirement System (SERS) and the Pennsylvania School Employees Retirement System (PSERS) pension programs are less than 68 percent funded. A healthy pension funding ratio is about 80 percent funded, the report concludes.
In addition, employer contributions are expected to rise significantly in the coming decade, reducing the state’s ability to pay for mandated programs and services like medical assistance, public education, public safety, roads and bridges, the report concludes.
Read more and view the full report after the jump
In the budget year starting next July 1, state revenues are expected to grow by about $819 million, But pension costs are expected to eat nearly two-thirds (62 percent) of that increase. That’s around $511 million that could have been spent elsewhere, the report concludes.
“Without any pension reform, the state must continue spending reductions to account for this amount in balancing its budget,” Zogby’s office said.
The report also includes proposed reforms that it says will “build long-term stability to the pension systems and make them more affordable for the state and, ultimately, the taxpayer.”
Last summer, lawmakers held hearings on a variety of reform proposals that included changes in benefits structures, making employees contribute more and extending the vesting periods required to claim benefits.
In his statement, Zogby concludes “the taxpayers did not create this problem, nor did commonwealth or school district employees. As we move forward, we must keep the taxpayer top of mind and not harm current and past employees.”
“We will not touch accrued benefits, nor will we allow the pension problem to continue for future generations. We need to fix this problem for the future stability of both the pension systems and the commonwealth’s budget,” he said.
Here’s the full report: