CPA task force offers its take on Pennsylvania's financial state
Hoping to advance the legislative agenda, the Pennsylvania Institute of Certified Public Accountants today provided its recommendations to help policymakers address the state's fiscal challenges.
PICPA's fiscal responsibility task force released its second report — the first was in 2011 — looking at everything from the status of the state-run pension systems and the Act 47 distressed municipalities program to prevailing wage, infrastructure, taxation and the streamlining of state government.
On pensions, the task force recommended a plan similar to what Gov. Tom Corbett has proposed. It said the state should move away from a defined-benefit plan in favor of a defined-contribution, or 401(k)-style plan, for new hires while maintaining the current pension system for existing retirees.
Chairwoman Susan Howe said the concept and judiciary decision that prospective benefits for current employees cannot be changed should be challenged. That is line with the governor's plan, which was released last week.
The two state-run plans — the State Employees' Retirement System and Public School Employees' Retirement System — have an unfunded liability that totals more than $44 billion.
"The pension situation is dire," Howe said.
The PICPA report is clear that annual plan funding for pensions should not be deferred, which goes against the governor's idea of short-term "collar tapering" of contributions to provide some general fund relief.
Howe likened the state's Act 47 program to a black hole since many of the municipalities in it have been there for more than a decade, some for two decades. The task force is recommending a time limit of three years.
The task force also recommended that communities examine cost-saving opportunities such as regionalizing services, sharing a tax base and cooperative buying.
On prevailing wage, the task force is recommending that the project threshold of $25,000 be increased to at least $200,000 and then indexed to consumer price index increases.
Based on wage data, prevailing wage raises the total cost of construction projects by 20 percent, on average, Howe said. This represents about $2 billion in extra costs for state taxpayers each year.
Lancaster County Republican Rep. Gordon Denlinger said prevailing wage should be addressed as part of the debate on transportation infrastructure funding.
He said he expects it to be wrapped up in the final budget for 2013-14.
PICPA said needed funding for infrastructure should come from increased user fees and increased gasoline taxes. Public-private partnerships, or P3s, also will play a key role, the task force said.
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Learn everything you need to know about the state pension crisis -- at both the state and municipal levels -- by reading Jason Scott's 2012 project.