A new report detailing the causes and possible remedies for Pennsylvania’s $41 billion unfunded pension liability is something like an opening salvo in upcoming talks between the governor’s office and stakeholders.
If the head of the commonwealth’s largest public sector union is any indicator, the lines in the sand for this negotiation have already been drawn.
The report released Tuesday by Gov. Tom Corbett’s budget office suggests possible reforms to the state’s pension systems could include switching future public employees from their current retirement plan to a 401(k)-style plan that locks in their contribution instead of their resulting benefit.
That option hasn’t worked in other states, according to David Fillman, director of AFSCME Council 13 union.
“That actually makes the problem worse because now employees are not contributing to the giant pool that is needed for funding, they have their individual accounts,” Fillman said.
The report also suggests reducing the not-yet-earned benefits of current employees.
Jay Pagni, a budget office spokesman, says the $41 billion hole means the state can’t rule out changing the benefits of current employees.
“We do have the opportunity to at least look at the current employees — and not touch anything that has been obviously accrued to this point — but look at how changes to this system can benefit an employee in the future but benefit the commonwealth in the long run,” Pagni said.
Pension reforms passed in 2010 changed only the benefits of employees hired in 2011 and thereafter.
Fillman says the state won’t be able to revise current workers’ future benefits without breaching their contract.He says if the state is ready to begin negotiations, he wants to see some commitment to raise revenues to solve the pension fund dilemma.