At the first in a series of hearings on Pennsylvania’s public pension debacle, little else could be agreed upon aside from the size of the problem.
Richard Dreyfuss, a researcher with the conservative Commonwealth Foundation, says the $40 billion the state owes its own pension systems must be taken care of on as tight a schedule as possible.
He says he’s seen private-sector companies buck up and pay down the debt by making cuts elsewhere.
“They talk about retiree medical benefits, looking at head count, looking at wages, looking at all line items within the state budget,” he said. “I mean, they have to be considered.”
But the chairman of The Public Employee Retirement Commission, the group hosting the hearings, says such moves will only make the next decade of pension payments out of the state budget even more painful to taxpayers.
Anthony Salomone says the panel should be picking possible ways to fund its pension systems without heading off the fiscal cliff that’s predicted, with payments projected to rise from roughly $1 billion to $4 billion by 2016.
He suggested the idea of taking out a bond — borrowing money, in the hope of a higher rate of return, and using any return on investment for the pension fund.
But Dreyfuss countered that’s not a good idea.
“Would you, in today’s world, take out another mortgage on your house at 3 percent and invest in the stock market? And if that question gives you pause, and it probably should, that’s the basic point I would make,” he said.
Even if a pension obligation bond were a net gain for the state, Dreyfuss said he doesn’t like the idea of leaving politicians in charge of found money that was intended to pay for future pension obligations. He says it’s too tempting to put that money into what’s more politically popular.
The panel is trying to draft recommendations for the governor on how to fully fund the state’s public pension systems.
The Corbett Administration plans to have a proposal included in next year’s budget.