New Castle News

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November 28, 2012

Our Opinion, Part 2: State must look at different ways to control costs

NEW CASTLE — It’s no secret that Pennsylvania faces an increasing budget burden to cover pension costs for state employees.

The same situation exists in many states, with various reforms being pursued in order to reduce pension expenses.

This week, Gov. Tom Corbett declared his intention to seek more aggressive reforms for the pension funds of Pennsylvania’s employees. While declining to articulate specific details, the governor and his staff outlined some options that are viewed as part of the mix.

Politically, this is a touchy subject. Any moves that might affect future pension payments is bound to produce some angry responses from state workers.

So on the surface, at least, there may be reluctance on the part of many lawmakers — Republicans and Democrats alike — to deal with the issue.

Yet as the governor’s office has noted, state tax dollars used to cover pension expenses are not available for other programs. Reducing the taxpayers’ burden to fund pensions will free up money for other uses.

That concept should have appeal to members of both parties.

But how do you do it? How do you make changes to the state’s pension system without treating workers unfairly or prompting lengthy legal reviews that ultimately reject reform proposals?

One way is to offer certain guarantees. For instance, Corbett says he does not want to make any changes that would impact payments to those already retired. Likewise, whatever current workers have accrued in their pensions to date would remain in place.

Instead, the governor is looking for adjustments into the future. And an array of options is being advanced for consideration.

These would range from raising the retirement age necessary to receive a pension, to increasing the amount employees contribute to the fund, to altering the calculations used to determine pension amounts.

Such changes have been applied elsewhere. For example, Social Security has increased its retirement age and added a sliding age scale for eligibility. Younger workers have to wait longer to receive full coverage.

Another possible change would involve switching from the current defined benefit plan to a defined contribution plan for state workers. The existing defined benefit plan guarantees payments regardless of the strength of the pension fund. A defined contribution plan — similar to 401(k) programs many private-sector workers have — would pay retirees based on what’s available, without going back to taxpayers for more money.

We are sure that any discussion in Harrisburg linked to pension reform will spark controversy. But adjustments to the system are needed to control costs. We call on all parties to participate constructively in addressing this issue.

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