The Tribune Democrat, Johnstown, PA

State News

November 29, 2012

Corbett: Pension cuts would affect all state employees

HARRISBURG — Gov. Tom Corbett acknowledged Thursday that his administration is considering reducing future pension benefits for current Pennsylvania state employees and teachers, and said any such cuts should be distributed evenly to include lawmakers and judges.

“When you don’t have the money, you can’t have the pension plans continue to take so much out of the taxpayers’ pocket,” he told reporters, comparing the state’s situation to pension trends in the private sector.

Corbett conceded that the state constitution may shield judges from any reduction in pension benefits and said any major reduction in public pension benefits passed by the Legislature would likely end up being decided in a lengthy court battle.

An administration report released Monday warned that the growing financial obligations of the state’s two major public-sector pension funds threaten to drive taxes up, drain funding for other state programs and hurt business growth. The report ruled out higher taxes but said prospective cuts for current employees should be considered.

The State Employees’ Retirement System and the Public School Employees’ Retirement System already face an unfunded liability of $41 billion.

Last year, state government paid about $1.1 billion into the funds.

The amount of taxpayer money going into the funds is expected to double to $2.2 billion in the year that starts July 1 and to exceed $5 billion by 2019.

Despite case law interpreting the state constitution that bars reductions in benefits for tens of thousands of current employees, Corbett said he believes it is legally possible to do just that by limiting the reduction to future benefits employees have yet to accrue.

For example, he said the “multiplier” – a percentage applied to an employee’s years of service and final average salary to produce his or her retirement benefit – could be reset at a lower rate for the latter part of the employee’s career.

“You can cut the multiplier for folks going forward even if they (are) vested ... because they still have the benefit of that period that they had the multiplier,” Corbett said. “Legally, can you do that? I believe you can.”

David Fillman, head of Council 13 of the American Federation of State, County and Municipal Employees, which represents 45,000 state employees, said any attempt to reduce employees’ right to earn future pension credit would violate the constitution.

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