Pension Reform Plan Becomes Legislation

Bills that are about to be introduced in the House and Senate will reflect the comprehensive pension reform plan that Governor Tom Corbett outlined back in February.  “Should we be successful, this will be the most comprehensive pension reform package in the United States of America,” explains Senator Mike Brubaker (R-Lancaster), who will sponsor the Senate bill.  As Chairman of the Senate Finance Committee, Brubaker also vows to schedule a public hearing on the issue. 

Without pension reform, supporters say the only other options are deep budget cuts or sharp tax increases.  “We have to convince both sides of the aisle in the legislature that this isn’t a partisan issue, this is a future of Pennsylvania issue,” Governor Tom Corbett said while flanked by supporters at a lunchtime news conference in the capitol building. 

Pointing to the current $47-billion dollar unfunded liability across the state’s two big public pension plans, Corbett says each Pennsylvania household would have to write a check for $9,500 just to cover that cost.  He adds that without reform the state’s pension obligations will consume more than 60-cents of every new revenue dollar in the years ahead.  The state’s pension obligation is growing from $1.1-billion dollars last year, to $4.3-billion by 2016. 

So what would the Corbett plan do?  Starting in 2015, new hires would be enrolled in a 401(k)-style defined contribution retirement plan, instead of the traditional defined benefit pension system that exists today.  Current employees would remain in the defined benefit plan, but their future benefits would be reduced to help save the state $12-billion dollars over the next 30-years. 

Doing this, the Corbett administration says, will allow the state to save $175-million dollars in the coming fiscal year.  PA’s 500-school districts are scheduled to share in nearly $140-million in savings. 

But opponents say there are hidden costs that outweigh the potential savings.  “You would speed up the process at which all of the dollars that are currently there would be paid out,” state Treasurer Rob McCord says of the move to phase out the existing pension plans, “and the professional investment managers would have to move it all towards fixed income, highly liquid assets that have very low returns.”

The public sector unions continue to lead the opposition, pointing to a 2010 pension reform law they say is just now starting to yield results.  “We have more folks going into it, money going into the system for the unfunded liability, and our returns are doing better,” AFSCME Council 13 executive director David Fillman said on an afternoon conference call with reporters.  He’s referring to Act 120 of 2010, which reduced new hires’ benefits while requiring them to pay more into the system.  Fillman says 11,000 workers have been hires since the law took effect. 

Even if state lawmakers get past the wrangling over the dollars and cents of comprehensive public pension reform, the question of constitutionality will undoubtedly wind up before the state Supreme Court.  And that may be what’s giving Harrisburg the most pause with just eight weeks to go before the new fiscal year.

Pension Reform Could Drive Budget Debate

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. 

Charles Zogby briefed reporters on the budget just prior to the Governor's speech on Tuesday.

Charles Zogby briefed reporters on the budget just prior to the Governor’s speech on Tuesday.

“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.


Corbett Opts to Privatize Lottery Management

Early Friday evening the Corbett administration announced its decision to hire a private sector manager to run the Pennsylvania Lottery.  The administration has been exploring the possibility for months, as a way to secure steady revenue growth for the programs that benefit PA’s senior citizens.  Ultimately it received one bid, from Camelot Global Services – the same company that runs the National Lottery in England.

The “notice of award” comes just days before the Senate Finance Committee is to convene a public hearing on the controversial issue.  Below you will find complete statements being issued by various stakeholders:


The Corbett Administration (Department of Revenue):

Harrisburg –– In the effort to secure critical, long-term funding for older Pennsylvanians, Secretary of Revenue Dan Meuser today announced the next step in the selection process for the the Private Manager of the Pennsylvania Lottery. 

The Commonwealth of Pennsylvania has issued a notice of award to Camelot Global Services PA, LLC, which provides for a 20-year Private Management Agreement.  A notice of award is not a binding contract. 

Under Pennsylvania procurement laws, the issuance of the notice of award allows the Corbett administration the opportunity to disclose contractual and procurement details of the Private Management Agreement at the Senate Finance Committee Hearing scheduled for January 14. 

With the issuance of this award, Secretary of Revenue Dan Meuser, Secretary of Aging Brian Duke and Pete Tartline, Executive Deputy Secretary, Governor’s Budget Office will be able to address all relevant contractual procurement questions at the hearing. 

The administration will gather information at the hearing and the near future will determine what is in the best interest for Pennsylvania seniors.


Camelot Global Services: 

“We are delighted the Commonwealth of Pennsylvania has issued a notice of award for the private management of the Pennsylvania Lottery. We know the state has placed enormous trust in giving us responsibility for its Lottery and we intend to work tirelessly to earn that trust. We are confident in our projections on growing responsibly the Pennsylvania Lottery over the next 20 years and guaranteeing the economic future for seniors programs. We are committed to make major investments in the lottery – in its brand, in its operations and in its people. We fully recognize that at the heart of any successful organization is its people. We intend to retain as many current lottery employees as possible and increase the number of employees in Pennsylvania overall.”


State Senate Democrats:

Harrisburg — January 11, 2012 — Senate Democrats today released statements expressing dismay and disgust at the actions of the Corbett Administration  in announcing the notice of award as it relates to the private management agreement, (PMA), for the Pennsylvania Lottery. 

“This is extremely disappointing and disturbing,” said Senator Jay Costa (D-Allegheny).  “The action taken by the Corbett Administration was done without public input.  Today’s decision has the potential to jeopardize senior programs and put taxpayers on the hook.”

“This has been a bizarre process that violates the public trust,” Costa continued.  “There were no hearings, little opportunity to understand the proposed PMA and no scrutiny. The process was violated and the citizens of Pennsylvania were abused by this arbitrary action.”

Senator John Blake (D- Lackawanna), Democratic Chairman of the Senate Finance Committee pointed out the proposal needs legislative authorization and it demands legislative scrutiny.

“The process was culminated when the General Assembly was not in session and there was little public examination of the proposal,” Blake said.  “This process wasn’t transparent — it was opaque. No one could see the end result except a small group of the governor’s inner circle.”

Expressing extreme disappointment on behalf of his constituents, Senator Rob Teplitz (D-Dauphin) said the use of a secretive process would lead to the privatization of a significant state asset and is unprecedented. “This is not a proper way to alter generations of public policy and violated the public trust.” 

“On a personal level, many of the affected employees are my constituents and have been treated with complete disregard,” Teplitz said.  “The arrogance of this administration in the way this was handled is deplorable.”

“I am extremely disappointed in this administration’s decision to jam this deal through at the last minute prior to a key Senate Finance Committee hearing,” said Senator Matt Smith (D-Allegheny).  “This shows a disturbing lack of transparency by the Corbett administration and hinders a meaningful dialogue regarding this multi-billion dollar deal. The Camelot plan certainly deserves a proper examination by the General Assembly and Pennsylvania taxpayers are entitled to further information.”

Senator John Wozniak (D-Cambria) echoed the sentiments of his colleagues related to the PMA.  “There are many questions related to how this privatization effort impacts seniors and property tax relief related to gaming.  The concerns of taxpayers should have been taken into consideration and questions answered before the governor took this action.”


AFSCME Council 13 (State Workers Union):

HARRISBURG – (JANUARY 11, 2013) AFSCME Council 13 will continue to oppose Gov. Tom Corbett’s plan 

to give away as much as $1.5 billion in PA lottery funds that could fund vital senior programs to Camelot

Global Services, the U.K.?based corporation that wants to take over the lottery.

Gov. Corbett signed a contract tonight after months of secretive negotiations with Camelot.

“It’s just incredible that the governor would ignore the General Assembly and the thousands of 

Pennsylvanians we’ve heard from who understand that this is a bad deal for our seniors,” said Dave

Fillman, Executive Director of AFSCME Council 13.

“This is a midnight raid. The governor rushed this deal through when the legislature was not in session.

He refuses to provide access to any of the documents that they’ve traded back and forth with Camelot

and he has refused to hold a single public hearing on this deal,” Fillman added.

AFSCME has provided a counter?proposal to the administration to modernize and expand the lottery 

that would provide $1.5 billion more for senior programs than Camelot would under its flawed plan. 

“Apparently, the governor wants to privatize something – anything – no matter the costs to 

Pennsylvanians,” Fillman said. “Our lottery is one of the best in the nation and this administration just

two weeks ago was congratulating our team for the great work they’re doing. Now, they’re telling 

people thanks, but we’re terminating your job.” 

AFSCME and seven Democratic lawmakers filed a lawsuit in Commonwealth Court to stop the governor 

from privatizing management of the lottery. Seniors who benefit from lottery programs and several

lottery employees also joined that litigation.

In addition, AFSCME is working with lawmakers in both parties to oppose Camelot’s proposal to change 

current state law to drastically reduce the Commonwealth’s annual commitment to lottery?funded 

programs. Current state law mandates that the state invest 27 percent of the Lottery Fund in senior 

programs annually. That minimum returns to its standard level of 30 percent on July 1, 2015.

But Camelot is betting that lawmakers will change that law and maintain the 27 percent floor for

the next 20 years, through 2033. This change alone would amount to a $1.244 billion loss to seniors if 

the same sales revenues are achieved without Camelot’s profit taking.

“For 42 years, the lottery has always gone well above the minimum because that’s the right thing to do,” 

Fillman said. “But under this deal, every $1 above that minimum goes to Camelot’s bottom line.”

Lottery Lawsuit Filed in Commonwealth Court

Union officials are mounting a legal challenge to the potential deal to privatize the management of the Pennsylvania Lottery.  “We feel that based on the Lottery Act passed in 1971… the privatization of the Lottery is not something the governor has exclusive jurisdiction to do.  We feel that legislative action has to be taken also,” explains AFSCME Council 13 Executive Director David Fillman, who points out that the General Assembly is currently between sessions. 

Several Lottery workers and Democratic state lawmakers have joined AFSCME in the effort to permanently block Governor Tom Corbett from entering into a deal that turns Lottery management over to a private entity.  Fillman says the Lottery is working well for government, and does not need to be privatized.    

A 20-year, $34-billion dollar bid from Camelot Global Services is currently under review, with a December 31st deadline fast approaching. 

“This is a frivolous lawsuit that’s looking out for the special interests of a union, rather than what the governor is trying to do, which is look out for the best interest of Pennsylvania’s senior citizens,” Corbett spokesman Kevin Harley tells Radio PA. 

Harley says the only reason privatization of Lottery management is being explored is to ensure revenue growth for the programs that benefit older Pennsylvanians.  He says no decision has been made.

Pension Issue to Heat up this Winter

The latest prelude to legislative action on Pennsylvania’s public pension crisis came in the form of the Keystone Pension Report, a 19-page document released by the Governor’s Budget Office this week.  It details what led to the $41-billion dollar unfunded liability problem, the consequences of inaction and possible solutions. 

If you do the math, each Pennsylvania household is on the hook for $8,000 worth of the unfunded liability in the state’s two big public pension plans. 

While laying out a broad framework for fixing this mess, the Keystone Pension Report notes several key points: tax increases should be off the table, retirees should not be affected, and the accrued benefits of current employees should not be touched. 

That last point, however, leaves the door open for the exploration of changes to current employees’ future benefits, and that has the public employee unions especially concerned.  “The constitution protects that contract.  No one has the unilateral right to change that contract,” says AFSCME Council 13 Executive Director David Fillman in stressing that current workers’ benefits are sacrosanct. 

A spokesman for the Governor’s Budget Office says the report does not recommend one particular route to solvency, it simply lays out all of the options. 

Governor Tom Corbett wants to include comprehensive pension reform in next year’s budget, and Senate Republicans have already signaled their intent to prioritize the issue as well.

State Considers Bid from Potential Lottery Manager

State officials have until the end of the year to make a decision on a 20-year, $34-billion dollar bid to turn over the day-to-day operations of the Pennsylvania Lottery a private company.  After qualifying three potential bidders, the Commonwealth received one bid from Camelot Global Services PA LLC.  It’s the same company that operates the National Lottery in the United Kingdom.

Department of Revenue spokeswoman Elizabeth Brassell says the state would be well-protected by the potential private management agreement (PMA).  “There’s a profit threshold that the company has to meet in order to get paid incentive compensation,” Brassell says.  “Beyond that, if there’s any contract year where that profit threshold is not met, there are additional securities… that the state can dip into and deduct shortfall payments from to make up the difference.” 

The Corbett administration is looking to generate more money for programs that benefit senior citizens, a population that’s on the rise in PA.  The Pennsylvania Lottery is the only lottery in the nation, which generates profits solely for senior programs. 

But opponents point to last year’s record profit of more than a billion dollars at the Pennsylvania Lottery.  “There’s only 2.3% administrative costs; so it’s not only profitable, but it’s also efficient,” says AFSCME Council 13 Executive Director David Fillman. 

AFSCME represents 175 of roughly 220 Pennsylvania Lottery workers, and Fillman says they will sit down with state officials to discuss the bid next week.  “We’re confident that anything that the Commonwealth wants to do… it’s something that the current employees can do.” 

No decision has been made.  Brassell says they will evaluate Camelot Global Services and crunch the numbers determine if a PMA is in the best interest of the state.  Even if the bid is accepted, the state would maintain ownership and control of the Pennsylvania Lottery.

Capitol Rotunda - Facing House Chamber

Largest State Workers Union Approves New Contract

The state’s largest employees union has approved  a new contract calling for some concessions.  Members of the American Federation of State, County and Municipal Employees Council 13 voted to approve the contract with the state by a 4 to 1 margin.

David Fillman, executive director, says members did lose a couple of sick days and there’s a wage freeze in the first year, but all totaled for the four year contract, it’s a very fair contract.  Fillman says it’s fair not only for the employees, but also fair within the confines of the economic situation today and the budgets as we go forward. Members will also have to contribute more to the cost of their health care benefits.

The four year contract does call for wage increases in the final three years.  Fillman says it’s four years of labor peace and they can live with that.  AFSCME represents about 45,000 state employees.

The Service Employees International Union Local 668 is still voting on a new state contract. The union represents about 10,000 state workers and they are voting by individual ballots.  Those ballots are due by mail or to their chapter by August 9th

The Corbett administration reached deals with the two unions in late June, after requesting concessions in the face of a difficult budget.

Harrisburg's skyline

AFSCME Council 13 Reports Tentative Deal with Corbett Administration

One of the biggest state employee unions is reporting on its website that it has reached a tentative agreement with the Corbett Administration. AFSCME Council 13 says the deal was struck around 11pm Wednesday night, but so far neither side is releasing any details. The tentative contract must still be ratified by the union membership, a process which will begin with a policy committee meeting in Harrisburg on Saturday.

AFSCME Council 13 is one of about a dozen-and-a-half state employee unions whose contracts are set to expire on June 30th. Talks with another of the big unions, Service Employees International Union Local 668, have been less fruitful. The union described Wednesday’s session as “frustrating,” with only minor movement as the two sides remain “miles apart.” Those talks broke off around 10pm last night and are set to resume today.