Cuts in future benefits for public employees floated as Senate GOP ups ante in pension debate



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HARRISBURG, Pennsylvania — Pennsylvania's cold war over public pensions is heating up as Senate Republicans consider resurrecting a plan to pare future benefits for hundreds of thousands of current state and school employees.

Majority Leader Jake Corman said this week that savings from the proposal, which ironically appears similar to the one advanced by Republican former Gov. Tom Corbett and rejected by the GOP-controlled Legislature in 2013, could free up money for other programs.

"This could give us real savings right now. ... The crisis is here. We need to deal with it," said Corman, who also threatened to withhold the votes to pass a state budget for the fiscal year that starts July 1 unless unspecified pension reforms are approved.

Democratic Gov. Tom Wolf, who defeated Corbett's bid for a second term in the November election, opposes any reduction in benefits.

"The Republicans are talking about nothing new. They're talking about what has failed in the past," said Wolf's spokesman Jeffrey Sheridan.

The governor is proposing a $3 billion bond issue to refinance the school employee system's debt with additional help from profits from a modernization of state liquor and wine stores and savings from reduced payments to charter schools.

"Not enough," said Sen. Patrick Browne, the Senate Appropriations Committee chairman who is writing the bill. "We're just taking on too much risk."

Wolf, who took office in January, hopes to save $8 billion over 24 years plus an additional $2 million in savings from expected reductions in money managers' fees.

Corman, R-Centre, provided few details about the plan that Senate leaders are considering, but the concept is similar to Corbett's ill-fated proposal, which he hoped would save $12 billion over 30 years.

Corbett's plan would have frozen current employees benefits and replaced them with reduced benefits after that. The plan also called for new hires to enroll in a 401(k)-style defined-contribution plan in which they would invest their money.

The proposal failed to gain traction, however, because of concerns among members of both parties that the reduction in benefits would not withstand a court challenge and fears that any savings would be offset by massive transition costs associated with establishing the separate plan for new hires.

The two funds — the Public School Employees' Retirement System and the smaller State Employees' Retirement System — administer pensions for more than 700,000 people, including nearly 368,000 who are still working.

Together, their assets total about $80 billion. But the legislative debate has focused mainly on ways to reduce the unfunded liability — the gap between the amount owed to employees in future years and the projected assets that will be available to pay them. That debt now exceeds $53 billion for the two funds.

State taxpayers' share of pension costs for the fiscal year that starts July 1 is $2.2 billion, Sheridan said.

Browne, R-Lehigh, said the Senate Republicans' plan is expected to be filed in April.

"We're taking a new look at the whole problem and see what a plan should include," he said.

In the House, several Republican representatives are working on legislation to change the pension system, including a proposal to limit new hires to a defined-contribution plan, said Steve Miskin, spokesman for the majority caucus.

The spokesman, Steve Miskin, said the prospect of reducing the future cost of current workers' pensions is "always a discussion point," but that no proposal with that goal has emerged so far.

"We're trying to put together a plan that is stable and legal," he said.

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