The state Senate is preparing to introduce a pension reform bill nearly identical to the compromise bill that fell three House votes short last fall.
Senator Pat Browne and Majority Leader Jake Corman released a co-sponsorship memo this week to reintroduce a side-by-side hybrid plan. The bill will contain a 401(k)-component paired with a smaller defined benefit component for new employees. New employees can also choose a single 401(k)-style plan, which will provide portability and retirement control.
Additionally, this proposal allows current employees to opt-in to the hybrid plan or 401(k)-only plan—a welcome improvement over last year's proposal.
The side-by-side hybrid is not perfect, but it satisfies three important goals. It shifts future financial risk away from taxpayers; it enhances choice and portability for new state and public school employees; and it slows the accumulation of taxpayer-backed pension debt.
Pension reform is not just good policy. It’s also popular. A poll conducted last October showed 54 percent of voters support placing new state employees in a 401(k)-style retirement plan, including 67 percent of Republicans, 51 percent of Independents, and a plurality of Democrats.
Lawmakers can’t afford to delay. Pennsylvania’s unfunded pension liability stands at $63 billion—almost double the General Fund budget. And it keeps growing. In fact, SERS just announced a 6.5% investment return for 2016, a full percentage point short of their assumptions—meaning our pension liability will continue to rise and taxpayers will continue to pay more.
Government union leaders and their lobbyists will no doubt lobby hard against the bill, but delaying true pension reform will only harm the retirement of state workers and jeopardize the paychecks of taxpayers. It’s time to start moving in a new direction.