Pension Crisis Facts: Is the Stock Market to Blame?
Pennsylvania’s two main pension systems, the Public School Employees’ Retirement System (PSERS) and the State Employees’ Retirement System (SERS), are dramatically underfunded. Together these plans have more than $47 billion in unfunded liabilities, which works out to around $8,400 per Pennsylvania household. Paying for this debt is draining public school resources and threatening to send local property taxes skyrocketing.
This is the first in a series of blog posts debunking the myths surrounding Pennsylvania’s pension crisis.
Myth: The 2008 stock market collapse is the sole culprit of Pennsylvania’s public sector pension crisis.
Fact: The stock market collapse and other investment losses account for only about half of today’s pension crisis. The rest of the problem stems from the following political factors unique to Pennsylvania’s pension plans:
- Legislators retroactively increased pension benefits in 2001, followed by a cost-of-living adjustment in 2002, which added nearly $10 billion in debt instantly;
- Legislation in 2003 and 2010 delayed pension contributions, which led to higher future taxpayer payments; and
- PSERS and SERS officials reduced their assumed stock market returns from 8 percent to 7.5 percent. These simple adjustments added $5.5 billion to the state’s pension shortfall.
For more information, visit our myths and facts on the pension crisis.