Pension Inaction Puts Public Employees at Risk

New Retirement Plan Will Protect Teachers, Troopers, State Workers, and Taxpayers

Good morning,

Despite Pennsylvania’s public pension costs jumping $2 billion—or $600 per homeowner—over the last six years and pension liabilities standing at an incredible $53 billion, some still claim fundamental reform is unnecessary. The truth is, this financial crisis can’t be contained by “letting Act 120 work” or using band aid solutions like pension obligation bonds.

Today, Commonwealth Foundation President and CEO Matthew J. Brouillette will testify before the House State Government Committee on the need for public sector pension reform that ends the political manipulation of the system and empowers public sector workers with control over their own futures.

“It is important to note that our public employees—from school teachers to state workers—are not to blame for this crisis,” said Brouillette. “They’ve paid, and continue to pay, into the state pension systems. But it was—and continues to be—the leaders of the government unions from PSEA, AFSCME, SEIU, UFCW and others who supported all of the bad policy decisions of the past fourteen years.”

Brouillette noted that reforms like the defined contribution plan contained in Senate Bill 1 would give public employees greater control over their financial futures:

“Public employees should be empowered and entrusted with full ownership over their retirement future. Personal ownership over one’s retirement account is of paramount importance at a time when the average worker changes jobs 10 times in his or her career. According to research from the Pew Foundation, an employee who switches jobs or moves to another state will fare better under a defined contribution plan than the status quo.”

The current defined benefit system also works against new public employees, particularly new teachers—three-quarters of whom pay into PSERS but change jobs before vesting in the system.

Brouillette says:

“The defined contribution plan under SB 1 would also correct the bias against new employees. Currently, benefits for long-term workers are partially paid at the expense of those who leave the public sector early. For example, fewer than 25 percent of Pennsylvania’s teachers become vested in the pension system, compared to a national median of approximately 45 percent.”

The status quo traps public workers in a failed system, invites increased layoffs, crowds out spending on other government programs, and makes tax hikes unavoidable.

“Ignoring these realities will not make them go away,” remarked Brouillette. “It is far better to begin addressing them proactively rather than having to deal with them like the city of Detroit has been forced to do—harming both public employees and taxpayers in the process.”

Brouillette’s complete prepared remarks are available here.

Brouillette and other Commonwealth Foundation experts are available for comment today. Please contact me to schedule an interview.

Best,

John Bouder
Senior Communications Officer
Commonwealth Foundation
717-671-1901
[email protected]