Lancaster Newspapers: Pa. Treasurer blasts Corbett pension reform plan

Date: 
February 26, 2013

By KAREN SHUEY
Staff Writer

Rob McCord and Tom Corbett agree on one thing: Pennsylvanians are on the verge of being buried in debt.

But that's where their agreement ends.

The state treasurer, who is rumored to be considering a 2014 run to unseat the governor, on Tuesday blasted key components of Corbett's pension reform.

"This is an irresponsible move that makes a big problem worse and fails to address the real issue," the Democrat said during a conference call with reporters.

McCord said Republican Corbett's proposal actually would increase costs for the state, school districts and ultimately taxpayers.

Citing information compiled by the Keystone Research Center, he said the governor's plan to shift the state's two pension systems away from guaranteed pension plans and toward defined-contribution plans will do nothing to deal with the $44 billion in unfunded liabilities.

The move actually would add to the problem over time, said Stephen Herzenberg the Keystone Research Center's executive director.

"The governor's pension plan is a lose-lose for taxpayers," he said. "It increases state and school district debt for current pensions and drives up costs for future pensions. The last thing policymakers should do now is dig an even deeper hole."

Christine Cronkright, deputy director of communications for Corbett, took issue with the comments by McCord and Herzenberg.

"Their attempt at 'demystifying' the pension crisis does not provide solutions, whereas Gov. Corbett has put a comprehensive pension reform plan on the table," she said. 

At the local level, legislators in both parties agree that pension obligations are swallowing up revenue, but they differ on how to deal with the unfunded liability.

Rep. Mike Sturla, a Lancaster Democrat, sides with McCord, arguing that changing future employees over to defined-contribution retirement plans will add to the problem.

Rep. Keith Greiner, of Leola, a Republican, said the advantages of a defined-contribution plan will make it worthwhile over time.

Among the top lawmakers between Corbett and McCord is Lititz-area legislator Mike Brubaker.

As chairman of the Senate Finance Committee, the Republican will be responsible for making sure every idea is researched, every argument is heard and every proposal gets a fair shot.

McCord said the center's research shows that Corbett's plan is not the best for Pennsylvania taxpayers.

Switching future employees to a 401(k)-type plan could make the underfunding problem worse, the report states, because as new employee contributions move to individual investment accounts, less money goes into the traditional plan to help finance promised pensions.

The Corbett administration has acknowledged that, as a result of lower employer contributions each year, its pension proposal will increase the state's pension debt by roughly $5 billion by 2019.

However, McCord said, the administration didn't factor in that fund managers will shift to less risky investment when the retirement checks come due.

A study also found that the defined-contribution plan would cost more — about $200 million more per year.

And these higher prices would trickle down to the state and school districts.

"The deal is bad for anyone who plans to live here after 2019," McCord said.

"Paying more for less is not the pension reform that most Pennsylvanians are looking for," Herzenberg added.

Cronkright said Corbett's plan includes more than switching new employees to defined-contribution plans.

"(They) are describing a problem by only looking at half of the facts and only one part of the plan," she said in an email.

It also proposes decreases in the amount of future benefits for current employees and limits employer contributions.

Herzenberg said that instead of coming up with something new, Corbett should have built on the 2010 pension reform law.

To address the spiraling debt, the Legislature approved Act 120, which initially lowered employers' pension contributions, reduced benefits for new employees, increased the retirement age to 65 and implemented a "shared risk" provision.

McCord said Corbett may have taken that advice if he was truly interested in finding a solution.

"He knows the proposals he came out with will be challenged in court, and he still sticks by them," he said. "It's an irresponsible way to govern."