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“Mistakes in the past” created pension mess, but no “silver bullet”

By   /   June 25, 2012  /   1 Comment

Daily Budget Roundup – June 25, 2012

By PA Independent Staff

“Mistakes in the past” created pension mess, but no “silver bullet”

HARRISBURG — Gov. Tom Corbett is very much aware of the multi-billion pension problem in Pennsylvania, saying today to reporters that pensions are a main driver for increased costs in the public sector.

“Nobody has a silver bullet. We have to work on some solutions, and I don’t think there’s any easy solution,” Corbett said.

Corbett began speaking about pensions while discussing funding for basic education. He said that some school districts had used federal stimulus money to build budgets and pay for salaries, “compounding the problem” by creating higher levels on salaries and pension contributions.

Corbett cited “mistakes of the past,” and the downturn in the economy as reasons for the state’s $40 billion unfunded liability.

The state increased pension benefits for all workers and public school teachers in 2001, then gave the same benefits to retirees in 2002.  At the time, the State Employees Retirement System, or SERS, and the Public School Employees Retirement System, or PSERS, were both fully funded.

In 2003, lawmakers voted to artificially suppress state contributions to the two pension plans for 10 years in the hope that investment growth would make wipe away higher contributions in coming years.

That worked, until it didn’t.  The economic crash of 2008 saw both funds lose more than 25 percent of their total value, forcing higher contributions on the state for decades to come.

Looking ahead, Corbett said he doesn’t see the economy growing fast enough to keep up with the burden — by the 2016-17 fiscal year, the state’s pension contributions alone will be more than $4 billion.

“When you’re talking about the future, when you’re talking about spending for education, for state government, pensions are going to eat us alive if we don’t, in the next year or two, get that fixed,” Corbett said.

This update is from 7:30 p.m.

DiGirolamo speaks following Corbett press conference, opposes block-grant funding

HARRISBURG — Just moments after Gov. Tom Corbett left a news conference where he and numerous county commissioners expressed support for changing how the state distributes some Human Services funds, Rep. Gene DiGirolamo, R-Bucks, held one of his own, criticizing the governor for moving too fast and putting vulnerable citizens at risk.

Rep. Thomas Murt, R-Montgomery, speaking at Rep. DiGirolamo's (left) press conference in the Capitol rotunda, says that he will "continue to fight" against Corbett's proposed changes


DiGirolamo, joined by representatives of various social services providers in the Capitol rotunda, attacked what he said was the Corbett administration’s failure to talk with the people who manage these welfare programs and with the families who depend on them.

“You’ve got to have the people in the room, at the table, who are actually delivering these services,” DiGirolamo said. “They have not talked most importantly to the families that are receiving these services.”

Corbett’s proposal would combine seven spending programs—among which include mental health, drug and alcohol programs, and child welfare — into one block-grant. Each county would receive a block grant, giving them more discretion in how much funding different Human Services programs receive.

Currently, the state determines spending levels for different programs, and counties must track how much they spend on each program.

The governor’s plan also calls for a 10 percent funding cut — about $84 million in total — to those human services programs, but DiGirolamo said the governor’s block-grant proposal is his main concern.

“This block-grant concept is going to be far more damaging for people who receive these services than the cuts will ever be,” he said.

This update is from 4:45 p.m.

Corbett stresses flexibility in plan to hack 10 percent from county-level human services

HARRISBURG – Gov. Tom Corbett argued Monday that providing a new funding structure for human services payments to counties would give providers more flexibility, less red tape and better responsiveness to local needs.

But he’s also taking heat from groups who are critical of his decision to cut those same programs by 10 percent — after he initially wanted to cut them by 20 percent — in next year’s budget.

Corbett assembled more than two dozen county commissioners at the state Capitol on Monday afternoon to help show support for his plan by stressing the newfound flexibility in his plan to provide one human services block grants in place of seven different line items in the budget.

“My administration wants to ensure that people in need can access help easily whether they are in need of one service from the county or multiple services,” said Corbett. “We want service providers to be more focused on helping people than on dealing with red tape.”

County-level human services include funding for drug and alcohol programs, housing assistance and aid for the mentally ill.

The governor wanted to cut those programs by 20 percent in his initial budget offering in February, but the state Senate reduced those cuts to 10 percent in its budget plan that passed in May.

Several House Republicans have expressed a desire to restore those cuts, and they have been joined by Democrats and advocates for the poor and disabled.

When asked, Corbett admitted that the savings from streamlining administrative costs would not make up for the 10 percent cut that is planned for those agencies.

Corbett and Secretary of Health Gary Alexander also declined to say how many people might be tossed out of programs as a result of the budget cut.

This update is from 4:15 p.m.

Secretary of education, House Dems get confrontational over spending

HARRISBURG — House Democrats and representatives from school districts who wanted to deliver 15,000 signatures to Gov. Tom Corbett had a surprise waiting for them:  Education Secretary Ron Tomalis.

The lawmakers were protesting Corbett’s decision not to increase funding for basic education.

State Rep. Eddie Day Pashinski, D-Luzerne, (left) and Secretary of Education Ron Tomalis (right) debate the proper level of public school funding in the Capitol on Monday.

State Reps. James Roebuck, D-Philadelphia, the minority chairman of the House Education Committee, and Eddie Day Pashinski, D-Luzerne, had an impromptu debate Monday morning with Tomalis in front of the governor’s office.

The meeting brought into focus a major budget issue — the state’s $26 billion public education system.

The two Democrats said plans by the Corbett administration and House Republicans to double the Educational Improvement Tax Credit to $200 million would erode revenues, which could otherwise be used for school districts.

What we’re asking is please don’t divert the money from the public schools into other areas,” Pashinski said.

Pashinski called for $300 million to help school districts pay for full-day kindergarten and early childhood education.

Tomalis argued the governor wants to find the best way to educate children, rather than maintaining the infrastructure of the public school system.

We’re focused not so much on a system, but we’re focused on the children in the system,” Tomalis said. “We want to make sure we are getting the greatest return on those dollars for the individual children.”

Tomalis said Pennsylvania’s $26 billion bill for basic education doubled in the past 15 years, and that required  serious discussion.

Roebuck said the state was spending less on teaching students because costs such as busing and infrastructure  have increased in the past decade.

We need to destroy the myth of increased education funding,” he said. “And that’s what it is, a myth.”

This update is from 10:50 a.m.