Proposed pension ‘fix’ won’t solve crisis

New legislation characterized as a solution to rising costs in Pennsylvania’s school employee pension plans will not help to solve the problem, and could actually increase costs to taxpayers.

PSEA President Jim Testerman said that legislation sponsored by Rep. Glen Grell (R-Mechanicsburg) and Sen. Gene Yaw (R-Williamsport), simply shifts costs from school districts back to state government, and uses schemes that in other states have proven more costly over time.

“Instead of dealing responsibly with the pension spike, this legislation would actually add more administrative costs, and shift more of the burden of funding school employee pensions back to the Commonwealth,” Testerman said. “This legislation would make it even more difficult to balance the state budget over the next several years.”

Testerman, testifying before the state Senate Finance Committee on December 16, told legislators that proposals, such as H.B. 2315 would have no impact on PSERS’ future employer contribution “spike” for the Commonwealth and school districts in 2012. The Pennsylvania School Boards Association, which supports H.B. 2315, acknowledged at the same hearing that future costs are “unknown,” and that any savings would not occur until 2020 at the earliest.

In addition, a provision in H.B. 2315 capping school district contributions to PSERS at their current property tax index would actually benefit wealthier districts more than poorer ones, who would have to come up with a larger percentage of pension costs through local revenues.

Testerman urged lawmakers to look past such schemes and pledged PSEA’s assistance in developing a responsible plan to address the funding crisis and protect the solvency of the Public School Employees’ Retirement System.

 “There are no easy solutions, but one thing is clear: the state and school districts must keep their promise to fully fund school employees’ pensions,” Testerman said. “The current PSERS benefit plan encourages individuals to become and remain educators, and ensures a stable and highly qualified workforce in our public schools.

“The ‘solutions’ in this bill make for good sound bites, but they won’t do anything to reduce the projected payment increase for PSERS, and could actually cause long-term problems. This plan would also harm Pennsylvania’s ability to attract and retain quality education professionals,” Testerman said. “We stand ready to work with legislators to develop a responsible plan that addresses the funding crisis and protects the retirement security of current and future public school employees.”

“Three states – Alaska, Nebraska, and West Virginia – moved to 401(k)-type retirement plans for new school employees similar to what this legislation would create here,” said Testerman. “Nebraska and West Virginia have already moved back to defined benefits plans due to the shortcomings of these plans, and Alaskan legislators are considering a bill to do the same.”

Rep. Grell and Sen. Yaw introduced their legislation in a news conference today at the state Capitol, also attended by PSBA officials.