Shocking Pensions a Reminder that we Need More Reform
The Philadelphia Inquirer recently published an article detailing the $100,000+ pension payouts for 500 retired state employees—a jarring reminder that Pennsylvania’s state retirement system is still troubled.
Fortunately, the historic pension reform bill signed into law this past summer begins to address the problem. The plan moves new employees to a hybrid pension system, in an effort to make the plans solvent. However, further steps must be taken to secure the financial future of state workers.
Five hundred retirees collecting more than $100,000 a year sounds like an astronomical amount of money, yet this total— approximately $50 million a year—pales in comparison to our $71 billion unfunded liability, which grew by more than $7 billion last year.
To be sure, the state should compensate public employees fairly for their performance. But the current retirement system rewards longevity and political manipulation over performance. Remember a large part of the current pension mess is due to the political decision to raise pension benefits in 2001.
Unlike defined-benefit plans, 401k-type plans are fully funded and independent from political manipulation. They are also portable, allowing workers to change employers without jeopardizing their retirement. They are a win for workers and for taxpayers.
Large pension payouts amid annual budget shortfalls and an enormous pension liability are good reminders that we need to continue removing political influences from the pension system.
If lawmakers want to keep their promise of a secure retirement for state workers, they must avoid complacency and continue to enact bold reforms.