Another bailout: Pension tension

From the BCCT.

There's no sense going after the local officials who only enforce policy. Take your concerns about tax policy to the tax writers in Harrisburg.

You don't have to go that far.

Rep. Galloway has a local office in Levittown
8610 New Falls Road
Levittown, PA 19054
Phone: (215) 943-7206
Monday - Friday
8:30 a.m. - 4:30 p.m.

Senator McIlhinney is even more local than that.
56 East Bridge Street
Suite 1
Morrisville, PA 19067
Phone: 215-736-5960
Toll Free: 866-739-8600
FAX: 215-736-5964

Another bailout: Pension tension
Pennsylvania taxpayers will have to dig deeper to help state and school workers retire — even as private pensions wither away.

There is not good news and bad news for Pennsylvania taxpayers. There is only bad news and worse news.

As taxpayers helplessly watch their 401(k) plans and other retirement savings dwindle, they are being asked to dig deeper into their pockets to prop up pensions for state and school employees. School pension costs will be the biggest hit, since nearly half the funding comes from the local property tax.

The Pennsylvania Public School Employees Retirement System recently urged school districts to start putting funds in reserve to prepare for a huge jump in pension costs anticipated in three more years. The districts’ share is projected to go from 4.78 percent of payroll in 2009-2010 to 16.4 percent in 2012-13. And that estimate, prepared before the stock market tanked this fall, assumes the pension fund will earn an 8.5 percent return on investment each year.

Since pension payments are mandatory, districts either must cut other expenses or raise taxes.

The state reimburses districts for about half the cost, but it all comes from taxpayers.

Unlike private employers, the state and school districts are prohibited by law from reducing or eliminating employee pension benefits or increasing the mandatory employee payroll deduction for pensions. School employees contribute an average of 7.3 percent of salary.

Two years ago, an Associated Press series on the pension crunch projected the taxpayer subsidy for state and school employee pensions would triple by 2012 to the equivalent of $240 a year for every man, woman and child in Pennsylvania.

And that didn’t include the multi-billion dollar cost of medical, dental, vision and prescription benefits for retirees.

The blame for this mess lies with the state Legislature (who else?). Mesmerized by a stock market boom, legislators in 2001 increased their own pensions by 50 percent and — to divert attention from their own avarice — gave more than 300,000 state and school employees a 25 percent hike.

This means public employees receive a pension based on 2.5 percent of salary (the average of the three top years of compensation) for each year worked. Employees 60 and older may retire at 75 percent of salary after 30 years of service and at 100 percent after 40 years, guaranteed for life.

Even by public sector standards, Pennsylvania is extremely generous.

Maryland, for instance, increased state and school employee pensions in 2006 from 1.4 percent of salary a year to 1.8 percent. A Maryland teacher may retire at 54 percent of salary after 30 years and 72 percent after 40 years.

Meanwhile, Pennsylvania taxpayers are stuck with the bill due to the Legislature’s fecklessness. We don’t know what the long-term solution is, but the first step should be for voters to “retire” those legislators who feathered their own nest at the public’s expense.