EDITOR: We are reading and hearing that schools throughout Pennsylvania are having to furlough staff and cut programs due to a lack of funds. This problem is due to the "pension fund crisis." How did this crisis occur? Who is to blame? The answer is because of poor decisions by our politicians in Harrisburg. Let me explain.
Pa. had a defined pension program for teachers since 1917. Everything worked fine with this system until the spring of 2001 when Governor Ridge changed the retirement multiplier for teachers and state workers from a 2-2.5 and increased the multiplier for legislators from 2-3. How long did it take for our legislators to pass this bill, act 9? The answer is one weekend -- 36 hours!
A change is the system was enacted to make up for the increase in retirement benefits. Mark Schweiker took over as governor when Governor Ridge resigned to head the newly created position of Homeland Security. Schweiker put a 2 year moratorium on what the state and school districts were to put into the system. The thought was that the stock market was doing so well that it would make up the difference that the employees had to pay. However, school employees and state workers were required to put 7.5 percent of their salaries toward their retirement. Our next Governor, Rendell extended the moratorium for eight more years. During this period the stock market went into a tailspin and we had to recessions causing the pension fund to lose a considerable amount.
By 2010 there was an unfunded liability of 47 billion dollars to the pension fund caused by the moratorium given to the state and school districts. Remember all school employees and state workers paid their share, 7/5 percent since 2001. When Governor Corbett took office in January 2011, the pension reform act of 2010, act 120 had been passed to address the unfunded liability. Under this act school employees made concessions creating a savings of 1.38 billion to existing liabilities at the time. This put the employers, state and school at 2.2 percent per employee making this one of the lowest in the country.
Governor Corbett is unwilling to give act 120 a chance to play out. Instead he wants to switch employees from a defined pension plan to a defined contribution plan. This plan will be more costly to administer and the employers will be paying four percent per employee. Also the 10 years of unfunded liabilities will still remain to be paid. Governor Corbett's plan will be more costly to school districts.
Educators are often labeled as a greedy bunch feeding off the taxpayers hard earned dollars, but educators did not lobby for the changes in the multiplier nor did they defer their pension payment obligations. Poor decisions were made by our legislators to create this "pension fund crisis" and it looks like this administration wants to continue to make poor decisions.