AFTPA President Ted Kirsch said last night that the Corbett administration is “using scare tactics, calling pensions a tapeworm eating away at the budget” to convince taxpayers that without radical changes the cost of teacher and state employee pensions is going to consume all of Pennsylvania’s resources.
Read the PDF report: The Keystone Pension Project: A Discussion of Structural Reform and Relief to Pennsylvania’s Retirement System for Long Term Sustainability.
Listen to an mp3 of the Rick Smith Radio Show.
Speaking to Labor Radio Host Rick Smith on Tuesday evening’s show, Kirsch said a new report by the governor’s Budget Office appears to be designed to convince taxpayers that the only way to eliminate the “unfunded liability” of the state’s teachers’ and state employees’ pension systems is to eliminate the defined-benefit pensions that public employees have funded throughout their careers.
“There is a problem,” Kirsch said in the 15-minute interview, which you can listen to here. But the problem is not as severe as the administration would have Pennsylvanians believe, and the legislature and the teacher and state-employee unions reached a bipartisan agreement to address budgetary concerns in 2010.
“Why is there a problem? Because from 2000 to 2010, the state didn’t pay what it was supposed to pay into the pension fund,” he said. “And they gave school districts a pension contribution holiday. The only people who were paying their fair share during that 10-year period were the employees who were making their full contribution.”
In addition, he said, there were two major stock market downturns during the decade, that erased earlier investment gains by PSERS and SERS pension funds.
He said the pension funds are funded at 69% (80% is considered a healthy funding level). “They are talking about a $41 billion unfunded liability, but that would be the amount if the pension fund were funded at 100%. “The underfunding is really 11%.”
“The average state pension in Pennsylvania is only $24,000 a year,” Kirsch said.
Smith pointed out that the new state budget office report also assumes that the economy will not recover. “We are still recovering. They are assuming nothing is going to get better in the future,” he pointed out. “If the 20 million people without jobs who aren’t paying taxes were put to work, if those people had jobs and we had an economy that was moving forward, I don’t think we’d have this problem.”
Kirsch said state budget officials, legislators and employees we the problem coming and “the public employee unions, in 2010 with bipartisan support, passed Act 120” which increased employee contributions, capped the annual retirement benefit, increased the retirement age and increased from 5 to 10 years the number of years it takes for an employee to become eligible for a pension.
The projections were that the changes passed in 2010 would remedy the problems over a period of years.
Kirsch added, there are “other ways of solving the problem. He said Gov. Corbett’s tax cuts, depreciation loopholes and tax credits for corporations are siphoning much-needed revenues from the state treasury.
Kirsch urged members of the two pensions systems to read the report (download a PDF here), stay informed and speak to their state legislators to allow the 2010 pension reform bill to work.
He cautioned: Part of the administration’s “scam” is to say tell retired teachers and state employees and current state employees and teachers they don’t have to worry. Vague language in the report leaves the door open for current employees having two different types of benefits – one for the years of service before these changes, and a different benefit for their years of service after these changes.