According to a press release from the Pennsylvania Office of the Budget, the pension trouble facing the Keystone State amounts to $41 billion in unfunded liability and pension costs are expected to claim 62 percent of the annual budget for state workers, including teachers. According to the Associated Press, Pennsylvania Gov. Tom Corbett is willing to face down the pension crisis but will need help from all parties involved. In addition, pension costs are expected to increase, which could put a strain on the state budget for state workers and trickle to school districts across Pennsylvania forcing property taxes to be raised.
How bad is the pension shortfall?
The current $41 billion shortfall means that the two state pension plans, one for state workers, including lawmakers, and one for teachers are funded at about 68 percent, according to the Pittsburgh Post-Gazette. Since a pension plan is considered well funded at 80 percent, the Keystone State is facing a fairly serious problem that will only get worse as time drags on, according to the press release from the Office of Budget.
Are there any obvious issues that could cut the pension bill?
One particular area receiving a fair amount of scrutiny is pension contributions for charter schools. According to The Mercury, charter schools receive a pension contribution from school districts that send pupil to those facilities, but also receive state reimbursement for pension costs, which results in a double payment often funded by taxpayers. According to the report, if the pension formula for schools falling under the charter umbrella were to be sorted out, Pennsylvania could save $500 million over the next five years.
What will Corbett seek to do to reduce the pension shortfall?
According to the Pittsburgh Post-Gazette, simply changing policies and benefits for new employees will not solve the pension debacle, and Corbett is poised to change benefits for current employees, which includes lawmakers and teachers, in order to keep the balances solvent. In any case, Pennsylvania residents will likely get a peek at the plan when the governor's budget proposal is made public in early 2013.
What caused the pension funding problem?
According to the Associated Press, the pension accounts were battered by poor returns on investments and trouble in the housing market. However, as The Mercury report indicates, sometimes confusion on calculations can create a problem as well. In either case, the state will look for a long-term solution to prevent action from having to be taken in the future.
Jason Gallagher is a longtime Pennsylvania resident. He has experiences in trends and developments in many regions from having lived in many parts of the Keystone State, and currently resides in the Pittsburgh area.
- Politics & Government
- State Budget & Tax
- Tom Corbett