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Legislator says clock is ticking: Time to tackle pension reform

By , - Last modified: May 3, 2013 at 10:37 AM

The lead sponsor of a House bill that could drop as soon as next week on pension reform said he is hoping for an “aggressive” approach as policymakers get set for the home stretch in the current fiscal year and begin debating the 2013-14 budget.

Chester County Rep. Chris Ross said his pending bill, which mirrors Gov. Tom Corbett’s February proposal on fixing the state’s pension systems, will be the most comprehensive version to deal with the crisis.

Together, the State Employees’ Retirement System and Public School Employees’ Retirement System have an unfunded liability of $47.4 billion.

Ross said the governor’s plan was well thought out and is full of actuarial analysis. Without its careful research, it would be “pretty tough to construct something like this” at this point in the process.

The 2012-13 fiscal year ends June 30 and Corbett has included pension reform in his budget proposal for next year. Without it, general fund cuts would be necessary, the administration has said.

Those cuts likely will be needed anyway, given less-than-stellar revenue estimates from the state’s Independent Fiscal Office.

“I fully expect changes will occur,” Ross said of the pension bill.

The legislation is expected to move new employees into a defined-contribution system in 2015.

The rest of the plan calls for changing the formula for future benefits in current employees’ plans. Beginning in 2015, the governor has proposed reducing the multiplier used to determine future benefits by 0.5 percent. “Final salary” under the Corbett model would be based on a five-year average rather than the current three.

Pensionable compensation would be capped at 110 percent of the average salary of the previous four years, while the ceiling on pension income would be set at the Social Security wage base, which is $113,700 for 2013.

Meanwhile, the 2013-14 budget would reduce the annual increase in the employer contribution limit to the pension funds to 2.25 percent, instead of the 4.5 percent increase scheduled to take effect. That amount would increase by 0.5 percent per year until it reaches 4.5 percent again.

The piece involving current employees’ future benefits expects to be the single most difficult part, Ross said. Legal challenges have been threatened by the unions.

“It’s now a question of which pieces people are prepared to accept,” he said. “It’s a question of will to tackle this problem. We’re getting closer and closer to a critical point.”

Ross said it’s a tough but necessary piece of legislation. Act 120 of 2010 did not do enough to fully address the problem, he said.

That reform act helped address an anticipated spike in pension costs by “smoothing” the increases over a long period of time. That law also reduced benefits for new hires.

The current-employee reforms would be the largest driver of savings in the governor’s plan — about $9.3 billion at PSERS and about $2.5 billion at SERS.

“Changes to new employees is helpful, but it will be more helpful 20 to 30 years from now,” Ross said.

A news conference on pension reform is slated for Tuesday, Ross said.

Sen. Mike Brubaker, R-Lancaster County, is taking the lead on the governor’s pension plan in the Senate.

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Jason Scott

Jason Scott

Jason Scott covers state government, real estate and construction, media and marketing, and Dauphin County. Have a tip or question for him? Email him at Follow him on Twitter, @JScottJournal. Circle Jason Scott on .

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