HARRISBURG, Pa. (WHTM) – Many lawmakers see Pennsylvania’s financial ship as the U.S.S. Poseidon with a $50 billion dollar tidal wave bearing down.
“That means if everybody retired today, we would come up $50 billion short,” explained Representative Glen Grell (R-Cumberland), one of the House’s acknowledged pension gurus. “Now, everybody is not gonna retire today and you have to pay this over time, but still $50 billion is a really big number.”
As the state and school districts continue to shovel increasing amounts of money toward retired employees, they have less money to spend on social services and classrooms.
“Every year I’ve been in office, four years, we’ve had to increase the state taxpayers contribution by half a billion dollars,” said an animated Representative Warren Kampf (R-Chester/Montgomery). “Any new revenue we get at the state is eaten alive by that pension contribution.”
“We’re trying to get rid of these six-figure guaranteed pensions at taxpayer expense,” said Representative Mike Tobash (R-Dauphin/Schuylkill).
Tobash’s bill would shift new hires into a hybrid 401(k)-type plan. He says employers in the private sector, on average, pay 2.7 percent of payroll toward retirement benefits and insists the number’s much higher in the public sector.
“In Pennsylvania right now, our employer contribution is more than 20 percent of payroll and is increasing to be more than 30 percent over the next few years,” he said. “It’s an unsustainable number.”
Schools are squeezed into cutting programs, laying off teachers, raising taxes or all of the above. Eric Epstein is on the Central Dauphin School Board.
“If we raise taxes to the index, which is 1.9 percent this year, we still won’t have enough money to fill the pension gap and any tax increase that goes forward, and this includes most school districts, will never find its way into the classroom,” Epstein said. “We’re drowning in pension debt.”
But that premise is not universally accepted.
“We don’t have a pension crisis in the state of Pennsylvania, we have a debt crisis in the state of Pennsylvania,” said Mike Crossey, president of the Pennsylvania State Educators Association, the statewide teachers union.
PSEA members receive pensions and Crossey reminds everyone that his members made their pension contributions through automatic payroll withdrawal. It was the state that simultaneously decided to give retirees more in terms of benefits and contribute less. Throw in a recession that crushed investment returns and you got that tidal wave upending the Poseidon.
“Look at the problem we have and that’s the underfunding that occurred for 12 straight years,” Crossey said. “Pay off our credit card debt and the pension system is sustainable moving forward as long as we fund it adequately.”
Lawmakers have heard the argument and agree with it – to a point.
“When someone says to me, ‘We paid our fair share,’ I say, ‘You’re right,’ ” Kampf said. “OK, but we’re still in this mess.”
Getting out of it won’t be easy. Lawmakers will have a huge fight just to tweak benefits for people not yet hired. Critics say that’s merely rearranging the deck chairs on the Poseidon and the wave is still coming.
“How are we gonna pay the 50 billion dollars back?” asks Grell “When are we gonna pay it back? And how are we gonna do it in such a way that it doesn’t bankrupt school districts?”
Candidate Tom Wolf downplayed the pension problem. Governor Wolf didn’t mention it in his inaugural address. It will be interesting to see if he bring it up in his first budget address in two weeks, on March 3.