HARRISBURG – June 19, 2013 – State Sen. John Blake said Pennsylvania taxpayers will be on the hook for billions if the pension reform bill reported out of the Senate Finance Committee becomes law.
Senate Bill 922 was originally heralded as a means to address the unfunded liability of the state’s two retirement funds: the State Employees’ Retirement System, or SERS; and the Public School Employees’ Retirement System, or PSERS. Supporters said it would accomplish this by shifting the pension systems from a defined benefit plan to a defined contribution plan.
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Blake, however, citing two recent actuarial analyses of the proposal, said he believes the bill would do far more harm than good.
“Two independent, objective and credible studies have proven that a transition to a defined contribution plan would cost Pennsylvanians billions more than the problem we face now,” Blake said after the committee’s vote today. “Severing our newer, younger workers from our current systems will shift the cost of meeting our existing pension obligations onto taxpayers, just as has happened in Alaska, Michigan and West Virginia.”
Blake, the committee’s Democratic chairman, said the state should allow the recently enacted Pension Reform Act 120 of 2010 to do what it is designed to do: provide some critical relief to undo the fiscal irresponsibility of prior decisions made in Harrisburg.
Buck Consulting released the results of a 30-year actuarial study last week of the PSERS pension plan, which followed a similar analysis in May of the SERS retirement fund. Together, according to the Keystone Research Center, the Corbett pension reform plan would cost taxpayers another $40 billion and would increase the cost of retirement plans for future employees by $2.3 billion.
Beyond the huge additional costs of SB 922, Blake said the state’s current pension systems’ plans are simply better for state employees and taxpayers because they aggregate investments and achieve higher returns on those investments, thus lessening taxpayer burden.
Current pension systems also promise a reasonable level of retirement security so state retirees do not have to rely on assistance to ensure dignity in their retirement. And, Blake said, the systems cost about half of what 401(k) plans cost in fees – money that supports the financial services industry but adds no value to the retirement security of Pennsylvania’s seniors when they retire.
Pennsylvania is in a fiscal challenge with its state pensions, one that is being met, in part, by the provisions of Act 120.
“SB 922 only exacerbates the problem and adds costs to Pennsylvania’s taxpayers and, as such, my colleagues and I could not support it in its current form,” Blake said.
The Senate Finance Committee referred the bill on a 6-5 vote.