Gov. Corbett proposed changes that would cut pension benefits for current and future school and state employees and undermine the defined benefit pension plans that have provided secure and stable retirement income to public employees for nearly a century.
During budget hearings before the House Appropriations Committee this week, PA Treasuer Rob McCord cautioned legislators against changing benefitss to a defined contribution plan.
McCord raised questions about the constitutionality of making changes to the pensions of current school and state employees and said the conversion from a defined benefit pension plan to another system would leave the pension systems unable to meet the retirement obligation to current and future retirees and increase the amount the state and school districts would have to contribute.
Gov. Corbett proposed placing new school and state employees in a defined contribution retirement plan, cutting the multiplier used to calculate benefits for CURRENT EMPLOYEES going forward and increasing the number of years used to calculate a worker's final average salary.
He also wants to:
- Change the calculation of future monthly pension payments for those who choose a lump-sum withdrawal of their contributions when the retire, or are terminated.
- Reduce the state's required employer contribution rates, again, despite the fact that depressing employer (state and school district) contribution rates from 2001-2010 played a significant role in undermining the once robust pension systems' funding.
Current employees' pension contributions accrued so far would be calculated according to the current formula, while future accrued benefits would be calculated based on a new formula, if the legislature OKs the governor's proposals.
Sen. Vincent Hughes, D-Philadelphia and minority chair of the Senate Appropriations Committee, said, “What we need to focus on are the priorities of Pennsylvania’s working families – solid job creation, boosting Pennsylvania’s economy and making sure our children have access to quality education.
“Because of the governor’s education budget cuts over the past two years, nearly 70 percent of the school districts in PA have raised local property taxes and 75 percent have been forced to eliminate course offerings."
You can view Budget Secretary Charles Zogby's Pension Power Point presentation here.