Earlier this month, Pennsylvania Gov. Tom Wolf outlined his plan to improve the state’s pension funding and ease pension costs for school districts.
On Monday, Wolf’s office offered more details, including some dollar figures.
The three main elements of the plan are:
– Issuing $3 billion in pension bond
– Cutting pension investment expenses by $200 million
– The state making its full actuarially-required pension contribution in fiscal year 2016-17
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Under the plan, Wolf wants to borrow $3 billion by way of a bond issue and persuade Pennsylvania’s two big public employee retirement systems to cut investment management fees by $200 million a year.
“We have tried to put together a comprehensive pension funding plan,” Wolf’s budget secretary, Randy Albright, told the Senate Appropriations Committee.
Under the administration’s plan, the state would make the full required contribution in 2016-17. That could mean paying more than $2 billion alone to the larger of the two pension systems, the Pennsylvania School Employees’ Retirement System.
Gains from investing the bond proceeds, along with savings from cutting investment fees would reduce annual payments to PSERS by nearly $1.3 billion over five years and $10 billion over 24 years, the administration says. That would ease the steep increases on the current pension obligation payment schedule required by a 2010 law to correct years of underfunding by the state, administration officials say.
Of the three proposals, the bond plan is the least likely to happen. That’s because it would need to be approved by state lawmakers – many of whom support a plan to switch new hires into a new, hybrid pension system.
Photo by Governor Tom Wolf via Flickr CC License