pennsylvania governor race

Corbett: “Entrenched Interests” Preventing Pension Reform in Pennsylvania

Pennsylvania Gov. Tom Corbett (R) is trailing by double-digits in many polls to opponent Tom Wolf (D) – but his campaign strategy of pushing the need for pension reform appears to be unchanged.

Corbett has been the most vocal critic of his state’s pension system, but most of his fellow lawmakers – and voters, for that matter – have not reciprocated that enthusiasm for major reform.

On Monday Corbett said that “entrenched interests” are preventing pension reform. And those interests, according to the governor, have seeds in both parties.

Reported by the Intelligencer:

“There are entrenched interests out there,” the governor said. “The public sector unions are all against change … There are Republicans that don’t like me. I’m pushing change. It’s very hard to get change in Pennsylvania.”

[…]

Corbett traces the current pension problem to 2001.

That’s when the state Legislature boosted the retirement package for state lawmakers and judges by 50 percent and increased pensions by 25 percent for 300,000 active state workers and school employees. Corbett wants to roll back those increases to pre-2001 levels for current employees — an annual multiplier of 2.0 rather than 2.5 for employees and from 3.0 to 2.0 for lawmakers and judges — and place new employees in a 401(k) style retirement plan.

But the Legislature, backed by the might of public section unions, has stood in his way.

“We said to present-day employees, going forward, that we need to ratchet it back to two,” Corbett said of the annual multiplier. “Did you earn that (2.5)? I don’t think so. You did nothing new.”

Corbett said he favors the state rolling back the benefits and letting the courts decide when the unions sue. The real problem for taxpayers, he said, would occur once the issue landed in court because the judges who benefited from the enhanced pensions would be asked to rule on the matter.

“What judge in this state can hear that case?” he asked. “It’s an economic conflict of interest. … People should be upset with that. I say, let’s try it.”

Corbett re-iterated that, if re-elected, he would call a special legislative session to push through pension reform measures.

Pennsylvania Candidate Wolf Doubles Down on Pension Stance

Pension reform has been a center-stage issue since May in the race for Pennsylvania governor.

During an interview this week with the Philadelphia Public School Notebook, Democratic candidate Tom Wolf forcefully doubled down on his position that pension reform isn’t the state’s fiscal priority. The exchange:

Q: How is the escalating cost of pensions impacting school financing in Pennsylvania, and what do you think should be done about it?

A: Our current pension situation is the direct result of almost 10 years of leaders in Harrisburg kicking the can down the road and the state paying less than its fair share. What we’re seeing from Gov. Corbett is more political games – he is pushing a plan that creates no immediate savings for taxpayers.

As governor, I will let Act 120 [a 2010 law reducing pension benefits to new employees] work and create innovative solutions that are fiscally responsible and fair and beneficial to taxpayers and future employees.

A further explanation of how the two candidates differ on the issue of pensions, from the Times-Herald:

Corbett says the burgeoning cost of Pennsylvania’s public pensions is a crisis that requires prompt, decisive action. Wolf argues that it’s a problem that can be resolved in the years ahead.

Corbett wants to scale back pensions for future school and state employees as a meaningful step toward savings. He says the taxpayers’ share of the pension costs for current employees — $2.1 billion this year — is crowding out funding for other programs and helping drive up local property taxes.

Wolf contends that the pension problems are partly the result of the state contributing less than its fair share of the costs for nearly a decade and that a 2010 law reducing pension promises to future employees and refinancing existing obligations needs more time to work.

Act 120 was a 2010 law that reduced pension benefits for some employees but kept intact the current defined benefit system. Wolf has been adamant that the law needs time to work.

Corbett wants to shift new workers into a 401(k)-type plan.

Photo Credit: “TomWolfYuengling” by Tom Wolf. Licensed under Creative Commons Attribution 2.0 via Wikimedia Commons

Pennsylvania Lawmakers Return From Break, But Pension Reform Remains On Backburner

Pennsylvania lawmakers returned to the capitol this week to convene for the fall legislative session. While they were out, Gov. Tom Corbett traveled around the state and continued to try to drum up public support for pension reform and his re-election.

But the pension reform bill currently in the House seems unlikely to go anywhere; lawmakers now have other bills on their mind. Reported by the Pittsburgh Post-Gazette:

Legislators returning today to the Capitol are expected to take up several bills during their month-long stint before the election, but there is little sign yet that the pension overhaul promoted by Gov. Tom Corbett will be among those headed to his desk.

House Republicans’ efforts to pass the legislation remaking retirement benefits for future state and public school workers consumed significant energy in the lead-up to the signing of the state budget in July. Mr. Corbett urged legislators to send him the bill, which would limit the defined pension benefit while adding a 401(k)-style plan, but with Democrats opposed, Republicans in the House were unable to rally enough votes from their own ranks.

The Republican governor embarked on a statewide tour to emphasize the costs of the existing systems, while House Republicans say they met to discuss pensions throughout the summer.

“We’re still within striking distance,” Steve Miskin, a spokesman for House Majority Leader Mike Turzai, R-Marshall, said last week.

If the bill were to clear the House, it would face another hurdle in the Senate, where members instead approved a bill to move elected officials from the traditional pensions systems to 401(k)-style defined contribution plans.

The bills that are taking precedence over pension reform include a proposal to increase taxes on cigarettes and legislation surrounding ride-sharing programs such as Uber and Lyft.

Democrats are also working on raising the state’s minimum wage and securing more education funding.

Photo: Chesapeake Bay Program via Flickr CC License

Pennsylvania Gov. Corbett, Trailing in Polls, Says He Will “Force Action” on Pension Reform

There’s less than two months until Pennsylvania residents will decide who becomes their next governor, and incumbent Tom Corbett finds himself trailing in polls by 15 points to Democratic challenger Tom Wolf.

Pension reform has been a central facet of Corbett’s campaign, and he doubled down on that stance Wednesday when he said he would “force action” on pension reform if he is re-elected. From the Philadelphia Inquirer:

“If I don’t get reelected for four more years, there will be nothing done about this, because Mr. [Tom] Wolf says there is not a pension problem,” Corbett said.

If he wins a second term, Corbett said, he would call a special session of the legislature early next year to force action on pensions, including for municipal workers. He said Scranton is distressed because of unaffordable pension obligations and predicted some school districts in Pennsylvania will come “doggone close to bankruptcy” without a solution.

Pension360 has previously covered polling data suggesting Pennsylvania voters are much less engaged on pension issues than they are on other topics, such as education. Corbett acknowledged as much on Wednesday in a chat with the Philadelphia Inquirer’s editorial board:

In the governor’s view, he is hurting politically because he has taken on issues “no one else will touch.” He mentioned his efforts to cut future pension costs, to end the system of state-controlled liquor stores, and to privatize management of the state lottery. The legislature, controlled by fellow Republicans, has stymied Corbett on all three priorities.

“If I had been looking toward reelection, do you think I would have taken on pensions, when all it does is get everyone upset?” Corbett asked. He added that he hoped voters would give him credit for trying.

Tom Wolf does not support Tom Corbett’s pension reform plan. In a statement Wednesday night, a Wolf spokesman characterized Corbett’s plan as “kicking the can down the road”.

Pennsylvania Lawmaker Proposes Trash Tax to Ease Pension Pains

Pennsylvania Governor Tom Corbett has made pension reform a major part of his re-election platform, but has had little luck finding lawmakers to help him push through proposals.

One lawmaker put a new idea in the ring Thursday, although it’s probably not what Corbett had in mind.

Reported by the Morning Call:

State Rep. David Milliard thinks there may be pension gold buried in the state’s landfills.

On Thursday, the Republican from Columbia County floated a bill that would impose an additional $3 tipping fee on waste haulers to reduce school districts’ rising pension costs.

The additional fee would generate an additional $51 million and be put into a new pension-only fund controlled by the state Treasury, according to a memorandum Milliard published seeking co-sponsors to his bill. The Additional Commonwealth Contributions to School Districts Account.” to be used to help districts lower pension costs. The money would be distributed to districts, but not charter schools, on a prorated basis.

The proposal is meant to ease pension costs for school districts, which are subject to rising contribution rates designed to help cover the state’s pension funding shortfall. From the Morning Call:

Mandatory pension payments for school districts rose about 4.5 percent to 21.4 percent of payroll this fiscal year. The rising rates are based on Act 120, which went into effect in 2011. The law sets a increasing, fixed rates the state and school districts must pay each year to cover back pension debt, which is now approaching $50 billion. The state and school districts are having trouble keeping up with those payments even though they are lower than they would be if the law were not in effect.

So far, no other lawmakers have sponsored the bill.

The Difference Between Tom Corbett and Tom Wolf on Pensions

Despite a lack of voter engagement on the issue, pension policy continues to play a large role in the Pennsylvania race for governor.

The candidates harbor very different views on how to handle the state’s pension system going forward, but the Associated Press did the service of clarifying where both candidates stand on the state’s pension issues:

PENSIONS

-Corbett says the burgeoning cost of Pennsylvania’s public pensions is a crisis that requires prompt, decisive action. Wolf argues that it’s a problem that can be resolved in the years ahead.

-Corbett wants to scale back pensions for future school and state employees as a meaningful step toward savings. He says the taxpayers’ share of the pension costs for current employees — $2.1 billion this year — is crowding out funding for other programs and helping drive up local property taxes.

-Wolf contends that the pension problems are partly the result of the state contributing less than its fair share of the costs for nearly a decade and that a 2010 law reducing pension promises to future employees and refinancing existing obligations needs more time to work.

Read the rest of the article for further clarity on where each candidate stands when it comes to taxes, education funding, and more.

With Lawmakers In Recess and Elections On Horizon, Pennsylvania’s Pension Debate is Heating Up

Pennsylvania Gov. Tom Corbett has spent the first week of August touring the state as part of his re-election campaign, and he’s using the opportunity to hammer home Pennsylvania’s need to lower the costs of its retirement system, and tout his policy ideas on the subject.

One idea that Corbett has frequently proposed is shifting some state workers from their defined-benefit plans into 401(k)-style plans. Nearly every state burdened with pension obligations has considered this policy option. Many have even implemented it. From PennLive:

Only Alaska and Michigan have shifted new hires into 401(k)-style programs, but nearly a dozen states have crafted hybrid programs featuring smaller lifetime pension plans along with a 401(k)-style plan, and some states, such as Florida, are giving new employees the option of going entirely into a 401(k)-style plan, our pal Deb Erdley at The Tribune-Review reports.

Corbett’s repeated harping on the pension issue has gotten him, to some extent, what he wanted back in June: a debate. Even if state lawmakers remain on vacation, many experts have been weighing in on the issue.

Richard Johnson, director of the Washington-based Urban Institute’s Program on Retirement Policy, makes this note on the switch from DB to DC:

“These defined-benefit plans work very well if you’re going to stay for 30-35 years, but they require a pretty large employee contribution, and they don’t work very well for the shorter-term worker,” Johnson tells the newspaper.

Stephen Herzenberg of the Keystone Research Center points to the experiences of other states as an argument against switching to a 401(k)-style plan:

In fact, when Florida created this choice, its traditional pension was overfunded. In a decade-plus since, the investment returns of Florida’s traditional pension have been 10 percent higher than the return on individual accounts. Over the 30 years that typical retirement contributions grow, this difference would become a one-third gap in savings available for retirement.

Alaska and Michigan did shift all new hires into 401(k)-style plans but the switch did not, in fact, work. Pension debt in both states grew.

Rhode Island did save some money but only because of deep cuts in traditional pensions, including for current retirees. The state then wasted some savings on a “hybrid plan” for new employees that included 401(k)-type accounts with low returns and high fees.

Guaranteed pensions need sound management and can get in trouble if politicians fail to make required contributions. But long term, there’s no beating the high returns of professional managers and the low costs of pooled pension assets. That’s why Pennsylvania’s current pension design is the best deal, long term, for taxpayers and retirees.

Nathan A. Benefield, Vice President of Policy Analysis at the Commonwealth Foundation, took issue with that critique:

Herzenberg claims that reforms moving state workers to a 401(k)-style retirement plan in other states have “failed” because their traditional, non-401(k) pension funds lost value during the most recent recession. Huh?

Every state¹s pension fund lost value when the stock market fell, including Pennsylvania’s, which went from being fully funded to today having more than $50 billion (and growing) in unfunded liabilities. That’s about $10,000 per household in the state.

Now here’s the rub. States like Michigan and Alaska would have lost more from their pension funds had they not started to convert new employees into a 401(k). In fact, without reform, Michigan’s unfunded liability would be upwards of $4.3 billion more.

Thankfully, because lawmakers in the Wolverine state acted early, they saved taxpayers those additional costs. Pennsylvania would have also had substantial savings had we followed Michigan’s lead.

Corbett has tried desperately to make pension reform a campaign issue. It has worked. He’s gotten the media, thought leaders and everyday citizens talking about Pennsylvania’s retirement system and the policy options to address the issues Corbett foresees.

That’s healthy for the state—but make no mistake, it’s probably just as healthy for Corbett’s election chances.

Screen shot 2014-08-08 at 10.35.12 AM — Credit: Wikipedia

He’s been gaining ground on challenger Tom Wolf in recent weeks.