PA’s Pension Problem

by Jonathan Walters

Widener University Masters of Public Administration Student

The Commonwealth of PA has a huge problem on its budgetary plate; a roughly 47-billion-dollar problem to be exact. This is the obligation from PA to its current and retired employees in the form of pension payments.  And according to PA’s Budget Secretary, Charles Zogby, this unfunded liability is certain to cause a further downgrade in PA’s credit rating if it is not addressed.

Given current projections, the State Employees Retirement System and the Public School Employees Retirement System will take decades to pay off. It is also estimated that in the next few years, this debt will grow to $65 billion; which represents a cost of $13K per household. Furthermore, there is a compounding problem resulting from a downgrade which would make it more expensive for PA to purchase capital.

Governor Corbett’s administration has proposed a set of measures to help combat this instability. One such proposal was the introduction of a 401(k)-styled retirement invest for future state or public school employees. This of course would not solve the existing problem, but it would keep the state from loading up on more debt.

Even though this threat is real (Moody’s downgraded PA’s credit rating last July), some are skeptical that pension reform will be addressed during this session.  Senator Rob Teplitz is quoted in the article below as saying that, “I don’t see it happening. At the end of the day, do you really believe the same body that increased its own pensions and caused this mess 12 years ago is going to vote to cut their pensions?” So not only do legislators have to deal with strong opposition from state unions, they would have to fight against their own financial self-interest.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s