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Report: Pa. pension payments means $13.2B in economic activity

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School and state employee pension benefits in Pennsylvania account for $13.2 billion in economic activity, according to a new policy brief from the liberal-leaning Keystone Research Center.

The commonwealth’s two public-sector pension systems paid out $7.6 billion to Pennsylvania residents in 2012, according to the brief. The five counties in the Business Journal’s coverage area — Cumberland, Dauphin, Lancaster, Lebanon and York — combined to receive $1.16 billion of that total.

The midstate and counties in the Philadelphia area receive the highest retirement payments. Montgomery County was No. 1 at $482.8 million, according to the brief. Dauphin County was No. 3 at $345.6 million, while Cumberland County, at $273.9 million, and Lancaster County, at $259.3 million, were No. 5 and No. 8, respectively.

These retirement payments in 2012 accounted for more than 3 percent of total personal income in five counties and between 2 percent and 3 percent in another 29 mostly rural counties, according to the KRC. Dauphin County was No. 1 locally at 3 percent, while York County was last at 1.1 percent of personal income.

Centre County was the highest in Pennsylvania at 3.5 percent.

The KRC has been a major critic of the Republican-led pension reform plan, which was originally proposed by Gov. Tom Corbett.

“Governor Corbett’s pension plan would jeopardize the retirement security of a future generation of workers, and that would harm the economies of many communities across Pennsylvania,” said Stephen Herzenberg, economist and executive director of the KRC.

The Corbett plan would move new employees into a defined-contribution system in 2015.

The governor also wants to change the formula for future benefits in current employees’ plans. Beginning in 2015, he 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.

“A plan that digs a deeper pension hole and undermines retirement security is not the pension reform most Pennsylvanians are looking for,” Herzenberg said. “Policymakers should build on cost-effective pension reforms enacted in 2010 and take real steps to shore up retirement security, not erode it further.”


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Jason Scott

Jason Scott

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

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