Corbett gambles on pension issue to turn race around

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    Seeing Pennsylvania Gov. Tom Corbett drawing a line in the sand this summer over public employee pension reform reminds me a little of Pappy O’Daniel, the rotund governor in the Coen brothers film “O Brother, Where Art Thou?” played by Charles Durning.

    When his son suggests that Pappy try and catch up in his re-election bid by embracing “re-form,” the guv whacks him with his hat and yells, “How we gonna run re-form when we’re the damn incumbent?”

    It seems Corbett has found a way: embrace pension re-form and run against the Harrisburg establishment.

    The governor says he wants an overhaul of the public employee pension system because it’s the right thing for Pennsylvania, and it’s true he’s advocated for it for a long time. But he’s taken his game to a whole new level this summer.

    His willingness to scrap his record of on-time budgets and pick a fight with legislative leaders of his own party and his barnstorming around the state tell me this is his attempt to change the conversation in a governor’s race that’s left him going nowhere.

    A good fit for the guv?

    Pension reform is an attractive issue for Corbett in a lot of ways. Most private-sector workers don’t have the kind of  traditional pensions public employees get, and Corbett can play on their resentment and say Democratic rival Tom Wolf’s beholden to public employee unions that contribute to his campaign.

    And Corbett can accurately say that while he’s pushing for a plan that would do something about the pension problem, Wolf hasn’t proposed a specific plan to deal with it. A new Corbett web video (above) fills the screen with ominous warnings of what runaway pension costs will do. It shows a series of moments from debates this spring in which Wolf seems to shrug the issue off, saying “there is no crisis” and “the sky is not falling.”

    Corbett faces a couple of problems in making this a centerpiece of his campaign, though. One, frankly, is that discussions of pension policy make the eyes glaze over.

    “It involves things like multipliers and how many years of service and what the state has to pay into the pension fund, and it’s just a complex issue that most voters don’t understand,” said Terry Madonna of Franklin & Marshall College. He says voters never rank pensions among the most important issues facing the state.

    The governor is doing his best to make the cost of pensions real, noting that many communities are raising property taxes, and that ballooning pension payments in future years will crowd out other spending and create pressure for state tax hikes.

    But Corbett’s other problem is that the plan he’s advocating, which puts new state workers in a hybrid plan that includes a 401(k)-style retirement account, doesn’t generate a lot of savings any time soon. Most of the projected $11 billion it would save is decades away.

    Corbett says we won’t get anywhere if we don’t start somewhere, and his plan is a first step.

    The other side

    I went back and listened to a couple of Wolf’s answers to debate questions from last spring, and discovered that the Corbett web video really didn’t take his remarks out of context. Wolf did say repeatedly there isn’t a pension crisis, though he said it could become one if nothing is done.

    He said we need decent retirement plans to attract good teachers and state workers, and said much of the problem the “sky is falling crowd” talks about is due to low interest rates, which depress the earnings of pension fund investments. He said when interest rates rise, things should get better.

    Wolf does say the state will have to deal with a debt accumulated from past mistakes (an unfunded liability at something like $46 billion), and he’s open to a variety of ideas to deal with that, including a pension obligation bond issue, in which the state would borrow money to put into the pension fund. That’s been done elsewhere, and it’s controversial because it more or less depends on the pension fund’s investments earning more than the cost of repaying the tax-exempt bonds.

    Wolf does not favor eliminating defined benefit plans.

    Does this change the race?

    Most of the political pros I spoke with were skeptical that Corbett would succeed in making pension reform a major issue in the race.

    One is William Green, a Pittsburgh political analyst who’s done consulting for Republican candidates in the past.

    “The governor is doing this awfully late in his first term, and it’s an issue that just doesn’t bring a lot of excitement with it,” Green told me. “I don’t think this is going to make much difference overall for his re-election effort, and I don’t think the Legislature is going to act on it.”

    It’s also interesting that the Corbett campaign focused on the pension issue in a web video, but put its precious TV ad buys into ads attacking Wolf on other things.

    I asked Corbett campaign manager Mike Barley if we could conclude that meant the campaign wasn’t sold on pensions as a big issue for voters, and he said no, it’s just they have other things to say about Tom Wolf at the moment.

    It could be the campaign is saving its ammunition for August, when the Legislature comes back into session and pension reform is in the news.

    If you’re interested in a deeper dive into the substance of the debate — it’s actually interesting if you have a little patience — you can get a lot of material on the Corbett approach here  from the state budget office. Here’s a critique of Corbett’s plan from the Keystone Research Center. And here’s a good primer on funding public pensions from Temple University’s Institute for Public Affairs.

     

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