Pa. pension debate heats up at hearing

Peter Jackson, Associated Press

HARRISBURG, Pa. (AP) -- Pension experts, an asset manager, and a national clearinghouse for state governments fielded questions Wednesday from a legislative panel scrutinizing Pennsylvania Gov. Tom Corbett's pension-overhaul plan, providing an abundance of information but no clear direction on how to proceed barely a month before the Legislature is expected to take its summer break.

Sen. Mike Brubaker, the Finance Committee chairman and prime sponsor of Corbett's bill, acknowledged resistance to the measure in the Legislature but said he remains hopeful a compromise would emerge.

Partisan tempers flared occasionally as Democrats on the Senate Finance Committee sparred with Charles Zogby, the governor's top budget adviser, over the severity of the pension funding problem, but the most of the discussion focused on the complex questions surrounding the subject.

When Sen. John Blake, the committee's ranking Democrat, suggested that cutting future pension benefits for hundreds of thousands of current state and school employees — the centerpiece of Corbett's bill — would violate the state constitution, Zogby said he believed it would not. Then he volunteered his own opinion.

If public employees' pension benefits can increase but never decrease, "to me that is the ultimate entitlement," said Zogby, who has been the administration's point man in selling the governor's proposal to lawmakers.

It's "the 'day one' rule, which is the day you walk into your job in a public school district or the state (government), you're guaranteed that deal for the rest of your life. Who gives that anywhere in America, much less the Commonwealth of Pennsylvania? No one," he said.

Sen. Rob Teplitz, D-Dauphin, said the pension crisis largely resulted from benefit increases and inadequate taxpayer contributions by past governors and legislatures dating back to Gov. Tom Ridge's administration.

"It's not fair to demonize employees and teachers, which has been an unfortunate part of this discussion, when they were along for the ride," Teplitz said.

State taxpayers' contributions to the pensions fund are increasing by more than $500 million a year, Zogby said.

Corbett proposes to save $12 billion over 30 years by reducing future benefits for current employees and requiring new hires to enroll in a 401(k)-style, defined contribution plan in 2015. Current employees would be credited for the benefits they have already earned and would remain in traditional defined benefit plans after the benefits are reduced.

Leaders of the Pennsylvania State Education Association and Council 13 of the American Federation of State, County and Municipal Employees said a 2010 law that reduced pension promises to future employees and refinanced the existing pension obligations should be given more time to work. The unions also have threatened to challenge the constitutionality of the benefit rollbacks if they become law.

Rich Hiller, a senior vice president at financial services company TIAA-CREF and one of two pension experts who testified, told lawmakers a defined-contribution plan can be "a true retirement plan" if the investment options are limited to long-term income and include resources to help participants make sound investment choices.