New Castle News

Closer Look

November 11, 2013

Pension funding creates headache for lawmakers

HARRISBURG — While lawmakers struggle to come up with a plan to deal with skyrocketing pension costs, there is one option that has remained off-limits: Tinkering with benefits for the retirees.

Some of those now-collecting pension benefits are the very lawmakers who boosted benefits for themselves and other state employees while approving state budgets that underfunded the pension.

In 2001, the Legislature passed a law that changed the funding formula for pension benefits, increasing a multiplier used to determine pension benefits and making the law retroactive to the beginning of each employee’s government career. Then throughout the following decade, the state repeatedly underfunded its contributions to the pension system while depending on investment earnings to make up the difference.

In some cases, retired lawmakers are now collecting more in annual retirement payments than the $83,801 a year their successors are getting paid for serving in the Legislature.

Merle Phillips, R-Northumberland County, was in the state House for 30 years before his 2010 retirement. He is collecting $120,252 a year in pension benefits.

The watchdog group Rock the Capital identified two other lawmakers who were in office for the 2001 benefit boost who get even more in annual pension payments. The top pensioner: Frank Oliver, D-Philadelphia, who collects $286,118 a year.

House Republican caucus spokesman Stephen Miskin said current lawmakers have largely determined that trying to go after the benefits of retirees and existing employees is probably more trouble than it’s worth. Some lawmakers think it’s just wrong to try to undo benefits that were promised employees and retired employees.

Under this view, the 310,000 retirees in the state’s two main public pension systems made their contributions, it was the government that failed to pay its share.

The consensus is that any attempt to tinker with benefits of current employees or retirees would end up in court. The state needs pension relief as soon as possible, so most lawmakers are looking for a solution that can avoid a legal fight, Miskin said.

Without changes to the pension system, “the 2014 state budget and school district budgets will have to spend several hundred million more for pensions than this year,” said state Rep. Brad Roae, R-Crawford County.

Gov. Tom Corbett’s plan that included tinkering with benefits for existing employees is out, said state Rep. Fred Keller, R-Union County. State House leaders have told rank-and-file lawmakers that some form of pension reform bill should take place in November or December.

That’s key, because it is unlikely that the Legislature will want to tackle anything controversial in 2014, an election year, Roae said.

Any pension reform will likely focus on moving new employees into 401(k)-style plans.

But actuaries hired by the state pension systems have cautioned that shifting new employees could bring costs that undermine any benefit.

“There are no easy answers,” said Rep. Jaret Gibbons, D-Lawrence County.

Keller said critics have exaggerated the costs of moving workers from defined-benefit plans into the type of defined-contribution plans favored by the private sector.

Gibbons said that the state government shouldn’t really be looking to the private sector for guidance. It’s just as likely a private business would have declared bankruptcy to get out of its pension obligations. That’s not tactic any lawmaker in Harrisburg is eager to endorse.

But, it’s exactly the route civic leaders in Detroit are trying to take.

A trial is under way to determine if the city can declare bankruptcy. The Associated Press reports that as part of its bankruptcy strategy, Detroit is trying to get out from under a $3.5 billion unfunded liability for pensions.

The Corbett administration has put the price tag for Pennsylvania’s pension crisis at $47 billion.

(Email: jfinnerty@cnhi.com)

1
Text Only | Photo Reprints
Closer Look
  • tv04.jpg New Castle director, writer, producer filming zombie pilot locally

    The horror genre holds a special fascination for Tom Stoops. He has been a devotee of that film style since he was young. So it makes perfect sense that as a director, executive producer, writer and actor, zombies would show up in his latest project.

    April 24, 2014 2 Photos

  • money.jpg Neshannock trail to be integrated regionally

    Construction of a downtown section of the Neshannock Creek Trail is expected to commence this summer. Lawrence County planning director Amy McKinney briefed the county commissioners yesterday on a 1,400-mile trails project initiated by Power of 32.

    April 23, 2014 1 Photo

  • Shale royalty meeting for landowners planned

    Lawrence County residents who have questions about royalties on gas drilling leases are invited to a meeting tomorrow.

    April 23, 2014

  • Townships to pave roads

    Youngblood Paving Inc. was awarded a contract for this year’s road maintenance in North Beaver and Little Beaver townships.

    April 23, 2014

  • oneill.tiff Union principal receives award

    Union Area School District’s elementary principal will receive the 2014 Distinguished Female Educator Award. The award from the Tri-State Area School Study Council is to be presented April 24 to Linda J. O’Neill during the 12th annual Dr. Jean Winsand International Institute for Women in School Leadership at the Edgewood Country Club in Penn Hills.

    April 22, 2014 1 Photo

  • Good to grow: Library to offer seed lending program

    Patrons of the New Castle Public Library will soon have another service to look forward to. For newcomers to gardening and seasoned pros, the library is having — for the first time — a seed lending program.

    April 22, 2014

  • Knives prompt reporting of school violence

    On a typical day last year, Pennsylvania schools caught 11 students toting weapons. They were knives, similar to ones used to slash 21 students and a security guard at a Pittsburgh-area high school, according to the state Department of Education.

    April 22, 2014

  • Ferannte.tiff Upholstery shop showcases music, talent

    Following in the footsteps of his father, grandfather and great-grandfather, Jim Ferrante is working to improve his community.

    April 21, 2014 1 Photo

  • Local pastor helping fire victims

    A local pastor is opening up donation avenues to help two families who lost their homes to fire this week.

    April 18, 2014

  • First Energy to replace transmission line

    FirstEnergy Corp. has plans to rebuild a power transmission line between the West Pittsburg plant and a Mahoningtown substation.

    April 18, 2014

House Ads
Seasonal Content
Section Teases
Must Read
Continuous Super Bowl Coverage