Pennsylvania taxpayers will be hit with higher taxes to help fund two state pension systems.
The average residential homeowner likely will pay an additional $385 in property taxes in 2012, said Richard C. Dreyfuss, a pension consultant and senior fellow of Commonwealth Foundation for Public Policy Alternatives.
Dreyfuss spoke Friday at an Issues Forum sponsored by the Blair County Chamber of Commerce and Pennsylvania Economy League at The Casino at Lakemont Park.
Decisions made several years ago regarding funding of the Public School Employees Retirement System and the State Employees Retirement System are coming back to haunt legislators - and potentially taxpayers.
In 2001, the General Assembly and Gov. Tom Ridge agreed to increase pensions for most state lawmakers by 50 percent and in doing so, bumped up pensions by 25 percent for about 300,000 active state workers and teachers.
In the face of substantially higher mandatory pension payments for state government and school districts, Gov. Ed Rendell and lawmakers struck a deal in 2003 to push back paying most of it for 10 years.
The pension systems also were hit hard by the poor performance of the stock market from which they receive a large portion of their investment revenue.
"We have overpromised the benefits and underfunded them," Dreyfuss said. "After the market failed after 9/11, the assets were no longer there, so the legislature deferred the costs to 2012."
Dreyfuss said something has to be done.
"We need to look at reform on a statewide basis. Any true reform should be consistent in principle and focus on taxpayers. If we fail to do that, we will bankrupt ourselves and our children," Dreyfuss said.
Dreyfuss is proposing a five-step solution which includes establishing a unified defined contribution plan for new members; prohibiting pension obligation bonds or other post-employment bonds; mandating funding reforms for any newly created defined benefit and retiree medical liabilities; and considering modifying unearned pension benefits.
Only then should the Legislature consider funding reforms, Dreyfuss said.
State Rep. Rick Geist, R-Altoona, said the new governor who will be elected in November needs to take the lead.
"This is a huge problem. The next governor has to sit down in a closed room and come up with a solution," Geist said. "This has to come out in the first week of December to be considered by the General Assembly."
State Rep. Jerry A. Stern, R-Martinsburg, said lawmakers are looking at all options that are available to solve this to the best benefit of the taxpayers.
"We have to take dramatic steps and reform this across the board. We don't have an answer yet, we are trying to come up with something that will work," Stern said.
Mirror Staff Writer Walt Frank is at 946-7467.
