Perhaps the most controversial piece of Governor Tom Corbett’s $28.4-billion dollar state budget is the call for public pension reform. The administration has penciled in $175-million dollars worth of savings next year, pending legislative action on the issue. They say reforms would also free up nearly $140-million for the state’s 500 school districts.
“The reality is that our pension costs are taking most of our available revenue growth,” says Budget Secretary Charles Zogby. The state’s pension obligations are expected to triple – to $4.3-billion – within the next four years. Without reform, Zogby says deep cuts would be unavoidable.
But legislative Democrats call it a false choice. “We’ll work with him on [pensions], but everything he proposed today is not right, and we won’t support,” says House Democratic Leader Frank Dermody (D-Allegheny).
The Corbett plan calls for new hires to be enrolled in a 401(k)-style defined-contribution plan and for adjustments to be made to the yet-to-be earned benefits of current state employees. No changes would be made to retirees’ benefits or the benefits existing workers have already earned.
The plan’s already raising legal concerns. “He’s talking about changing future compensation for current employees, which has already been decided in the courts that is something that’s illegal, back in 1983-84,” says AFSCME Council 13 executive director David Fillman.
The state’s two biggest public sector unions – AFSCME and the Pennsylvania State Education Association (PSEA) – are vowing a legal fight, and that has lawmakers on both sides of the aisle concerned about balancing a budget on savings that would ultimately be in the hands of the courts.
“The question is really, I think, what does a set of reforms look like that can secure 26-votes in the Senate and 102-votes in the House,” says Senate Republican Leader Dominic Pileggi (R-Delaware). Pileggi has been serving in the Senate for more than a decade now, and knows that pension reform can be a profoundly difficult issue.