HARRISBURG - Any effort next legislative session to deflate the ballooning unfunded pension liability and change the structure of public employee pensions could be thwarted by politics or the courts.
The unfunded liability, which was over $40 billion last fiscal year, is expected to reach $65 billion by fiscal year 2017-18, according to the latest Independent Fiscal Office projections.
The pension dilemma facing lawmakers is blamed on investment losses caused by two recessions in a decade, cost-of-living adjustments, a benefit enhancement in 2001, pension payment deferments and the commonwealth underfunding its pension payment obligation.
State pensions will cost almost two-fifths of the total increases in cost of state government over the next five years, according to IFO estimates. Assuming current spending patterns, state spending on pensions will rise from the current year's $1.16 billion for pensions to $3.18 billion by fiscal year 2017-18.
The total state budget is expected to rise by $5.4 billion in spending by 2017-18, assuming current spending patterns. More than $2.02 billion of that sum, or 37 percent, during that period is the expected rise in increased pension contributions.
And the General Fund expenditures to the two public sector retirement pension programs are expected to increase by about $500 million per year during the next three fiscal years, the IFO estimates.
The approach lawmakers hash out with Gov. Tom Corbett most likely will determine how high-profile a political battle it becomes.
Some House Republicans allied with public sector unions to stop legislation unions opposed, like changes to the prevailing wage and charter school laws and liquor privatization. And the trimming of the Senate Republican majority by three seats to 27-23 could lessen the cushion a 30-20 majority provided this past session.
"We try to address issues in a way that attracts support from across the aisle. We'll address the pension issue the same way. We intend to include Senate Democrats in the proposals moving across the Senate," said Senate Majority Leader Dominic Pileggi, R-Delaware.
"Whether there's a more difficult time reaching an agreement will depend on what position the Senate Democrats take on pension reform," he added.
Randy Albright, Democratic executive director of the Senate Appropriations Committee, said the Senate Democrats are looking at the options for addressing the pension issue.
Members of State Employee Retirement System and Public School Employee Retirement System have contributed between 6 percent and 7 percent of their pay to their pensions.
