Editorial: For business’ sake, pension reform cannot wait
We’ve heard Gov. Tom Corbett criticized as lacking vision, but we would suggest that in at least one area, his vision may be too big. And that’s getting in the way of meaningful, necessary action.
We’re talking about state pension reform. Back in February, Corbett proposed radical and sweeping changes to SERS and PSERS — which as of this writing have a combined unfunded liability of about $47.4 billion. The governor’s plan would place new employees in a defined-contribution plan; change the benefits formula for current employees; and make short-term collar adjustments in the employer contribution limit.
Since then, various legislators have put forward more modest plans, mostly focused on the first provision, moving employees to a 401(k)-style plan. It’s easy to see why.
First, the ballooning obligations of the two public employee funds must be reined in. Not incurring new obligations under the old defined-benefit plan would do that immediately.
Second, there is serious question whether changing benefits for current employees is constitutional — and the only way the commonwealth will find out is through a lengthy court battle. That’s a delay we cannot afford.
Third, critics reluctant to reduce the amount going into the funds have a point. The unfunded liability is projected to hit
$65 billion by 2018 and putting in less money doesn’t make sense. Moreover, as the economy and markets begin to recover, the state will be trading greater investment growth for short-term “savings.”
Reluctance to sign on to either of those two latter provisions could be enough to sink the whole package, unless the governor is willing to compromise and start small.
Gov. Corbett has quite a bit on his agenda right now, including getting a state budget passed on time, pension reform, liquor privatization, and funding for roads and bridges. Pension reform should come first — it simply cannot wait. Every day the unfunded liability builds, the cost of government and, in turn, the cost of doing business in the commonwealth increase. The best place to start is with the defined-contribution provision.
Conditions in Harrisburg should be perfect for getting things done: Republicans control both the state House and Senate, and a Republican sits in the governor’s chair. We urge them to work together and take that first step.
The state’s broken pension system didn’t get this way in a day, and it won’t be fixed by one bill, one legislative session or, possibly, even one governor. An “all-or-nothing” approach will be a missed opportunity that should prompt voters to question whether the right man is leading the commonwealth when election time rolls around.