Addressing State Pensions: Dr. Stephen Herzenberg's Testimony to Public Employee Retirement Commission
On September 5, 2012, Stephen Herzenberg, an economist and executive director of the Keystone Research Center, testified before members of the Public Employee Retirement Commission on the issue of state pensions.
Dr. Herzenberg started off his testimony by explaining that the existing legislative proposals to change public-sector pensions would increase costs to taxpayers.
"The existing legislative proposals to change public sector pensions would increase costs to taxpayers -- they are not 'better than nothing,' 'good for the taxpayer,' or 'pension reform,'" he said. "The legislative proposals that mandate that new employees participate in new defined contribution or cash balance plans would increase the contribution rates required for current SERS and PSERS defined benefit plans. These existing plans would become closed-end funds with the average age of members increasing as the plans wind down."
Dr. Herzenberg also discussed strategies the commonwealth could employ to help address a large pension problem facing many workers in the private sector.
"The state could create a turnkey system that allows small businesses to set up savings vehicles for their employees, with simple low-cost investment options, and with the default being that employees contribute to these plans. This would be a first step towards addressing the most disturbing pension crisis: the erosion of retirement security in the private sector."