| Pension scandal could rival pay-jacking
Tony Phyrillas , tphyrillas@pottsmerc.com
02/26/2006
From the Pottstown Mercury
If Pennsylvania voters were outraged
by last July’s Legislative pay grab,
wait until they getwind of the looming pension
crisis that state politicians have created.
The legislative pay-jacking is peanuts compared
to the potential economic hit involving pensions
approved by Pennsylvania politicians for themselves
and the state’s retired teachers.
The pay raise, which was repealed following months
of public outcry, would have cost taxpayers about
$20 million a year. The pension scandal has a potential
price tag of $4.5 billion.
A new study from the Harrisburg-based Commonwealth Foundationsays taxpayers will
have to fund a 672-percent increase in pension contributions -- from $584 million
in Fiscal Year 2004-05 to more than $4.5 billion in Fiscal Year 2012-13 -- for
the State Employees Retirement System (SERS) and Public School Employees Retirement
System (PSERS).
Would it surprise you to learn that the same gang that tried to raise its own
salaries 16 percent to 54 percent with a 2 a.m. vote on July 7, 2005, also gave
legislators, judges, school employees and other state workers outrageously generous
taxpayer-funded pension benefits?
All of this comes at a time when many Pennsylvania retirees have lost their pensions
or had them severely reduced by employers. Instead of lobbying for a $2 increase
in the state’s minimum wage, perhaps Gov. Ed Rendell could level with taxpayers
about the massive debt they face to ensure that state politicians retire in style.
"In a world where private-sector benefit cutbacks and cost reductions occur
on a daily basis, state government in Harrisburg has not responded in similar
fashion," says Rick Dreyfuss, author of the report and the former director
of compensation and benefits at The Hershey Co. "In fact, instead of reducing
the potential for financial disaster, actions in recent years have served to
accelerate the coming crisis in Pennsylvania."
Dreyfuss says the looming fiscal crisis is a direct result of legislation passed
in 2001 and 2002 that generated $10 billion in additional unfunded liability.
Legislation passed in 2003 served to refinance many of these additional costs
over a 30-year period. To be fair to Rendell, the 50-percent increase in pensions
for Legislators and others was signed into law by then-Gov. Tom Ridge, but many
of the incumbent politicians in Harrisburg played a key role in doubling their
lifetime pension benefits.
"Without significant changes in the design of both pension and retiree health
care benefits plans, the taxpayers of Pennsylvania will likely be facing unaffordable
costs," Dreyfuss concludes.
The study surveyed major private employers in Pennsylvania for comparison with
the PSERS and SERS pension plans and found that not only are the pension plans
for legislators, judges, the governor, public school employees and other state
workers among the most generous among taxpayer-funded plans in other states,
but they are far more generous than what can be found in the private sector,
Dreyfuss concluded.
"These benefits plans are operating in a vacuum, and without regard to either
the taxpayer or global economic realities, which puts taxpayers in financial
jeopardy," Dreyfuss said."State government, like every employer in
the private sector, must adopt more predictable and affordable retirement strategies."
In addition to the massive bill taxpayers face to fund these pensions, government
accounting changes that take effect in 2007 will require Pennsylvania state government
to annually recognize future retiree health care costs. State retiree health
care benefit programs surpass those found in any Pennsylvania company studied
by Dreyfuss.
Eventually, municipalities and school districts will be forced to adopt this
change in accounting practice. And that means higher property taxes for Pennsylvania
homeowners. So much for those tax rebates that Rendell and the Harrisburg Hogs
are promising to deliver before Election Day.
The 40-page report on Pennsylvania’s pension crisis can be downloaded in
PDF formatat www.CommonwealthFoundation.org or by calling the Foundation at 717-671-1901.
As you contemplate where you’re going to cut back in your household budget
to keep Gov. Rendell and the Legislators in the lifestyle of the rich and famous
they’ve become accustomed to, keep in mind that the primary election is
May 16 and the general election is Nov. 7. Rendell, all 203 members of the state
House and 25 of the 50 state Senators will be on the ballot.
You can give the incumbents your opinion of the pension mess they’ve created
by voting all of them out of office.
E-mail Tony Phyrillas at tphyrillas@pottsmerc.com
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