SAN JOSE, Calif., Oct. 26, 2016 — The Retirement Security Initiative (RSI) is urging Pennsylvania lawmakers to vote “Yes” on fundamental pension reform legislation that would save state taxpayers billions of dollars and safeguard retirement benefits for public workers. The bill, which passed a conference committee late Tuesday night, now heads to the Senate and House chambers for a yes-or-no vote.
The push to overhaul Pennsylvania's pension system comes as the state faces more than $63 billion in pension debt, which is twice the size of the state’s annual budget. According to RSI, the Commonwealth’s pension debt has skyrocketed due to continued poor decision-making, including system underfunding, risky investment assumptions and unfunded benefit increases. Pennsylvania ranks 49th among states for underfunding its pensions and is among one of the largest states nationally to underfund benefit increases, a factor that will ultimately cost the state approximately $50 billion in higher benefit payments over 30 years.
“Pennsylvania’s pension funds went from a $20 billion surplus in 2000 to a $63 billion deficit in 2015,” said RSI Board Leader and former Utah State Senator Dan Liljenquist. “For every day that lawmakers ignore this dire situation, it increases the taxpayers’ debt by $1 for every man, woman and child in Pennsylvania, or in other words $1,500 per year for a family of four.”
Legislation now before lawmakers would create a new plan for the State Employees’ Retirement System and the Public School Employees' Retirement System beginning in 2018. Employees would be given three retirement savings options from which to choose, including two defined benefit/defined contribution hybrid plans and a straight 401K-style defined contribution plan. The bill does not affect current employees and exempts state police officers, corrections officers and certain other enforcement officers from the hybrid DB/DC or DC plans for new employees.
According to the Pew Research Center, the proposal mitigates approximately 60 percent of risk if pension investments underperform, saving taxpayers more than $10 billion if returns were 6 percent. Further, employer contributions under the proposed plan are expected to be $2.6 billion lower over 30 years than contributions under the current plan.
"This pension reform package is a solid win for taxpayers and public workers,” said Liljenquist. “Not only would the cost to taxpayers be cut $4.3 billion over the next 30 years, but employees will no longer face an uncertain future where growing pension costs threaten the solvency of their retirement plan, putting at risk their hard-earned savings.
“For these reasons alone, it's critical that Pennsylvania lawmakers today vote ‘Yes’ on pension reform,” urged Liljenquist.