Issue Position: Pension

Issue Position

The current pension problem in Pennsylvania was caused by three factors:

In 2001, the past legislation and Governor Ridge took the irresponsible step of increasing the pension benefit for themselves and state workers and teachers.
The old legislature and Governor Ridge also allowed the state and school districts to underfund the pension systems for a number of years, thereby compounding the mistake of increasing benefits.
In 2008, sharp declines in the stock market caused the pension funds for public school teachers (PSERS) and state employees (SERS) to lose almost 40% of their value.
Over time, gains in the market will offset some of the shortfall that we currently face. But if we're going to avoid a 30% spike in employer contributions to the funds, systemic changes need to be made.

Toward that end, in 2010 Steve voted with the overwhelming majority of House members (192-6) to pass pension reform legislation ("the Pension Reform Act" or H.B. 2497). This was a true bipartisan effort as the lopsided vote demonstrated. In fact, every House member from Bucks County -- and there are 10 in total -- Republican and Democrat alike, voted for it.

This legislation reforms some of the problems of our public school teacher and state employee pension systems (i.e., PSERS and SERS) by:

Mandating that teachers and state employees contribute more toward their retirement.
Increasing the retirement age to 65.
Doubling the vesting period from five years to 10 years.
Reducing costs through lowering the benefit multiplier to pre-2001 levels.
Requiring new employees to assume more of the risk of downturns in the market.
Prohibiting employees from taking full pension benefits unless their years of employment, when added to their age, equals or exceeds 92 years.
Under state law these changes can apply to new employees only. Even so, they will save the funds more than $39 billion over time.

That averages to about $5,400 in savings for each household in the Newtown-Yardley area.

The Pennsylvania Constitution prohibits similar changes for existing employees. That is why Steve has proposed another bill (H.B. 1637) that would create a Public Employee Pension Commission. The Commission will have 6 months to prepare a comprehensive report including recommendations for long-term changes to pension systems to ensure fiscal solvency.

Finally, the Pension Reform Act that we passed in 2010 re-amortizes existing obligations over a 30-year period. That step also will help to avoid a potential spike in pension payments by school districts and the state.

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