Analysis of Tobash Proposal: Moving Backwards on Pension Reform

Authors: 
Stephen Herzenberg
Publication Date: 
June 2, 2014

Tobash Plan Does Little to Reduce Pension Debt But Will Erode Quality of Public Schools and Services, Hurt Retirement Security

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This policy brief analyzes the impact of the latest pension proposal from Representative Mike Tobash, one variant of which (“Corbett-Tobash”) would combine the Tobash proposal with Governor Tom Corbett's proposal to reduce pension contributions (via reductions in the “pension collars” that cap pension rate increases annually made by the state and school districts).

In analyzing Corbett-Tobash and other Pennsylvania pension proposals, we use five criteria, the first four of which have also been articulated on a bipartisan basis by Senators Michael Brubaker and John Blake, the chairman and minority chair of the Senate Finance Committee, as the basis for evaluating pension proposals. These four criteria are:

  • Impact on taxpayers;
  • Constitutionality;
  • Impact on retirement security for public employees (including new employees); and
  • The impact on near-term budgets, especially for public schools (with the goal being to provide some relief to school districts without violating the other criteria – no easy task).

We add a fifth criterion in this brief – impact on the quality of public services – because pensions have an important impact on the ability of schools and the state to attract and retain qualified and experienced teachers and other public servants. This impact should be weighed when evaluating alternative pension proposals.

In sum, the Corbett-Tobash proposal does not represent forward movement on Pennsylvania public-sector pensions. It would weaken retirement security while failing to make progress on Pennsylvania’s pension debt.

The final part of this brief reviews all of the existing pension proposals against our five criteria. It concludes that none of the proposals satisfy all of these criteria but that elements of the Grell and Senate Democratic proposals represent potential steps forward, partly because they propose to inject additional revenue into the pension systems to compensate for inadequate past employer contributions. Building on these elements, we offer a new framework for pension progress that includes

  • pension bonds,
  • revenue increases dedicated in part to pension contributions and/or paying off pension bonds, and
  • a negotiated search for other compromises acceptable to current employees (hence constitutional) and that bolster pension fund financial sustainability.

Read the Full Policy Brief (PDF)