The budget proposal due next week from Gov. Tom Corbett will require savings in public employee pensions to avoid significant cuts elsewhere, the governor’s budget secretary said this afternoon.
And while Budget Secretary Charles Zogby said the plan will not touch already-earned retirement benefits, he said it is likely to include changes to pension earnings that workers have yet to accrue.
“To not do pension reform will mean you then have to go back into the general fund budget and find savings,” Mr. Zogby said at a Pennsylvania Press Club luncheon. “That will mean cuts somewhere.”
Together, the State Employees’ Retirement System and the Public School Employees’ Retirement System have unfunded liabilities of more than $44 billion, according to actuarial reviews.
Under law, contributions from the state general fund to the two retirement systems will increase next fiscal year by about $511 million, Mr. Zogby said.
He suggested cuts to education funding would be one place to make up for increases in the state contribution to school retirement systems.
“I’m mindful to point out the bulk of our pension fund increases are coming in our school employee retirement system,” he said. “So you have to ask, well if we don’t make the savings there, should other areas of the budget bear the brunt of those savings going away? Should that fall in public education? These are tough questions we’re going to have to face.”
The director of the statewide council of the American Federation of State, County and Municipal Employees has argued that Pennsylvania case law does not allow the state to change the retirement terms of current employees.
Senate Majority Leader Dominic Pileggi, R-Delaware, and Rep. Glen Grell, R-Cumberland and a House point person on pension issues, have also said it appears the state Constitution does not allow changes to benefits that employees have yet to accrue.
Mr. Zogby said the governor’s legal counsel has been studying the issue.
“What the governor puts out next week we believe is legally sustainable,” he said. “So we’ll have that debate.”
Ted Kirsch, president of the American Federation of Teachers-Pennsylvania, said in a statement that legislation enacted in 2010 would gradually restore state pension contributions to sustainable levels.
In the meantime, he said, the state should meet its retirement obligations through corporate or shale-drilling taxes.
“The governor is using the public schools, students and teachers as pawns to advance an agenda that emphasizes privatizing valuable public programs and services,” he said.
Earlier this month, Mr. Corbett said he would unveil proposals on two other priorities — privatizing the state liquor stores and dedicating new funding to transportation infrastructure — before his budget address on Feb. 5.
The governor’s aides have since said he will announce his transportation plan with his budget proposal.
This afternoon, Mr. Zogby said it appeared a liquor-privatization plan also will wait for budget day.