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Monday, May 18, 2015

Pension Reform Bill Strikes a Responsible Balance
An Op-Ed


Pennsylvania faces a monumental state pension crisis. Public employee pension systems were initially designed with the goal of balancing the retirement benefits of employees and interests of taxpayers. Unfortunately, economic conditions over the past several years have tipped the scales heavily against taxpayers.

The state’s pension obligations are staggering. This year alone, we face a $1 billion increase in our pension contributions (in addition to $3.5 billion spent in 2014-15). As the pension crisis has continued to devour state resources and drive up property taxes, viable solutions have been difficult to come by.

In the Senate, we have been actively working to find a solution to this increasing problem. I recently joined my Senate colleagues in passing Senate Bill 1, legislation to restore balance by restructuring the state’s public employee pension systems.

While the pension problems are extremely complex, the goals and facts of Senate Bill 1 are simple:

• There will be no changes to current retirees’ benefits.
• Current employees’ previously earned benefits will not be changed.
• Current employees will be able to choose between increasing their individual pension contribution or electing to alter future benefits.
• All new state and public school employees will be enrolled in a mandatory, and fair 401k-type Defined Contribution Plan, that mirrors benefits generally offered in the private sector.
• Short-term and long-term costs to taxpayers will be lowered.
• A Public Pension Management and Asset Investment Review Commission will study and suggest improvements for the management of pension system assets.

Senate Bill 1 also makes it clear that lawmakers would be placed into the same 401k-style system upon re-election, ensuring that we are not asking new employees to participate in a system that we are not willing to participate in ourselves. This is not the first time that we have taken action to change lawmaker’s retirement plans to 401k-style plans. Last year I supported Senate Bill 922 to make this important change. Unfortunately the legislation received no vote in the House. Clearly, taxpayers expect and deserve that their Senators and Representatives lead by example.

By changing Pennsylvania’s pension systems, employees will be given a fair retirement plan and school districts will find themselves with additional resources to direct toward the classrooms, instead of constantly raising property taxes.

Senate Bill 1 is projected to produce $18.3 billion in savings over 30 years, according to three independent actuaries. The savings reflect the tangible, structural improvements to the pension system for current and future employees.

The pension crisis has created a huge strain on the state budget, and the only alternative to pension reform is perpetually higher property taxes, higher state taxes and more borrowing as proposed by Governor Tom Wolf. I am thankful that Senate Republicans have been able to develop a proposal that protects the pension system while avoiding these consequences. I look forward to my colleagues in the House of Representatives taking swift action on Senate Bill 1.

Senator Joe Scarnati is currently serving his 4th term in the Pennsylvania Senate. As President Pro Tempore of the Senate, Joe holds the third-highest constitutional office in the State. He was born and raised in Brockway, Pennsylvania and represents the 25th Senatorial District, which includes Cameron, Clinton, Elk, Jefferson, McKean, Potter, Tioga and portions of Clearfield County.

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