Bills address lawmaker pensions
HARRISBURG - Proposals to change the lucrative pension rules for 253 state lawmakers are gaining notice as Harrisburg prepares to grapple next year with the issue of escalating public pension costs.
Two bills specifically addressing lawmaker pensions were discussed recently at a joint hearing by the House State Government and Finance Committees on the overall pension issue.
The pension issue is gaining momentum because of a spike in payments by state and local taxpayers to meet pension obligations for hundreds of thousands of current and retired state government and school district employees.
Gov. Tom Corbett said recently the cost of meeting obligations is eating up more of state and school district budgets. Senate Republican leaders have announced plans to introduce legislation affecting pensions for new hires in state government and school districts. The House hearing examined a half-dozen pension reform bills already in the hopper.
The sponsors of the legislative pension bills said lawmakers must lead by example if they want to reform the two state pension systems for state employees and public school employees that are underfunded by $20 billion. They said the cost savings from overhauling legislative pensions would be small, but the political symbolism would outweigh that.
"The General Assembly cannot begin to solve this huge problem until it demonstrates a willingness to put its own house in order," said Rep. Tim Krieger, R-57, Greensburg, sponsor of the bill offering the most far-reaching changes.
Lawmakers now benefit from one of the best pension packages in one of the best pension systems in the nation.
They enjoy a defined-benefit pension plan based on salary, years in office and their own contributions, something disappearing in the private sector where defined-contribution or 401(k)-style plans based on a mix of contributions from employees and employers are common.
Krieger's bill would convert pensions for both current and future lawmakers to a defined contribution plan.
A bill sponsored by Rep. Eli Evankovich, R-54, Export, would institute a defined contribution plan for newly elected lawmakers and new staffers hired after Nov. 30.
"I believe that the legislative branch must step up and address taxpayer concerns, by serving as an example for the rest of the public sector," said Evankovich.
Krieger's proposal to place sitting lawmakers in a defined-contribution plan raises questions of whether that would be considered as impairing a contract. State officials and pension fund managers have said that Pennsylvania can't legally reduce pension benefits for current and retired employees because the state Constitution and case law define them as a contract between the state and its employed that can't be impaired.
But some suggest the contract definition may not apply to pension formulas and benefits not yet earned.
If enacted, Krieger's bill would likely face a court challenge on that score, said Richard Dreyfuss, a Hershey actuary who writes about pension issues for The Commonwealth Foundation, a Harrisburg think tank.
The state Constitution states that lawmakers shall receive salary, mileage "and no other compensation whatever."
Lawmakers will give priority this fall to bills to expand the list of crimes for which convictions trigger pension forfeitures, said Rep. Daryl Metcalfe, R-12, Cranberry Twp., who heads the state government committee.
A pension law enacted in November 2010 cut benefits for lawmakers who took office in 2011 and thereafter as well as future state and school district employees. These lawmakers have to rack up 10 years of state service, compared to the former threshold of five years, to be vested in a pension. They would have to contribute more of their income to cover investment losses than lawmakers in office prior to 2011.