We must pay our $70B pension debt
The Mirror’s call for a closer look at Pennsylvania’s pension systems and the many news stories published in reaction to the review commission’s recommendations are welcome developments on an issue that’s too often overlooked by Pennsylvanians.
However, transparency and attention won’t pay for Pennsylvania’s $70 billion unfunded pension debt. Much more is needed if we want to avoid the steep tax increases that will be needed to pay for an unsustainable pension system during a recession.
Act 5 of 2017 took a meaningful first step away from defined-benefit plans — in which politics dictate benefits and taxpayers bear all the risk — and gives new public employees and new lawmakers a choice between a hybrid defined-contribution (401k) and defined-benefit plan or a purely defined-contribution plan.
Now, lawmakers can continue the transformation initiated by Act 5 by doing the following:
Increase pension contributions to pay off the unfunded liability over a 20-year period, as has been previously proposed in the House.
Modify pension plan benefits not yet earned.
Limit state spending growth and use revenue options — like privatizing Pennsylvania’s liquor control system — to pay down the liability.
Enact municipal pension reforms, supported by a bi-partisan coalition of mayors, that increase transparency, and moves to cash balance or defined-contribution plans for new employees in distressed municipalities.
We must not only bring transparency to Pennsylvania’s ill-managed and politicized pensions, but we must take intelligent action to stave off the potential financial distress our pension liability holds over our heads.