New Castle News

Closer Look

December 8, 2012

John K. Manna: How to share state’s burden of pension costs

NEW CASTLE — We’re all in this together, which is the only good thing about Pennsylvania’s massive pension problem.

The state’s two pension plans that cover public school and state employees has a current unfunded liability of about $39 billion and is expected to grow by about another $22 billion in the next six to seven years.

How the state got into the mess is similar to that of the city of New Castle and other cities in Pennsylvania. Insufficient funds were put into the plans over the years, plus Sept. 11 and the 2008 stock market crash didn’t help.

There are two possible ways that have been suggested to begin paying off the debt. One is raising more revenue or cutting benefits that have already been earned. The Patriot-News in Harrisburg notes that attempting to do the latter would end up in the courts, with precedent being on the side of the workers.

And then there is Gov. Tom Corbett, who opposes increasing taxes. The alternative to that would be a cut in programs to solve the pension crisis.

Besides employee contributions, money for the pension funds comes from two sources: Local school districts and the state. However, the state established both pension systems, the first in 1917 and the second in 1923.

Someone — which I would suspect resides in Harrisburg or members of the Legislature — may suggest that if it means more revenue, then the state and the school districts should share the burden equally. I disagree.

While school districts may be at fault for not putting enough into the one fund over the years, the fact is that the state dictates the amount of money that goes into the fund. Plus, the state established the defined benefit plan. Therefore, if the answer is increasing taxes, then the state should pick up most of the cost.

Furthermore, raising school property taxes would place a bigger burden on individual taxpayers than would an increase in a state tax. The state naturally has a broader tax base, meaning individuals would not only pay less, but also pay equally.

The alternative would be cutting programs. Mentioned as the likely targets are the usual suspects — welfare and education. But why should those who had nothing to do with creating the problem be the scapegoats?

 

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