Pennsylvania’s largest retirement system is slamming a state Senate-approved pension overhaul that would further reduce, or “collar,” state payments into its pension funds.
“Typically the retirement system does not take positions on legislative proposals,” said Glen Grell, executive director of the Public School Employees’ Retirement System on Tuesday. “But we as fiduciaries are concerned about collaring the rate, which is another word for underfunding the plan.”
The state’s two pension systems together are underfunded by more than $50 billion, a debt fueled in part by legislative actions to reduce what the state contributes to the plans.
A Senate proposal passed by the chamber on Monday would reduce the state’s payments by $170 million, a short-term boon that will cost more to pay back.
“I’m not interested in PSERS opinion quite frankly,” said GOP Senate Majority Leader Jake Corman, defending the Senate-passed payment reductions. “It’s a small collar … and adds a little budget relief to the budget so we can fund our schools better.”
Corman added that the costs of shirking the state’s pension bill are eclipsed by savings from other pieces of the pension overhaul. But those changes will affect current employees’ retirement benefits, and at least one critic expects them to be countered with a lawsuit.
“Anything that affects current members … that’ll definitely find its way to a court challenge,” said Richard Dreyfuss, an actuary and a fellow with the Manhattan Institute, a free-market organization. “If you look at prior court cases, they have ruled that changing any type of provisions to existing members is an impairment of contract.”
Grell was not the only one who denounced the state pension payment collars. During remarks on the House floor Tuesday, Rep. Dan Truitt, R-Chester, likened the Senate-approved maneuver to “generational theft.”
“Stealing more money from our children — that’s wrong,” said Truitt. “I’ll never support that.”