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Altered pension bill would save PA $11 billion over long term, analysis finds

By   /   June 30, 2015  /   News  /   No Comments

By Andrew Staub | PA Independent

HARRISBURG, Pa. — Changes to a pension reform bill poised to reach Gov. Tom Wolf this week might alleviate some concerns about a legal challenge, but it will cost the state billions of dollars of savings, according to an actuarial analysis released Monday afternoon.

Instead of netting up to $18 billion in savings by revamping retirement benefits for state workers and public school employees, the Public Employee Retirement Commission projected the state will net long-term savings of about $11 billion after a House committee tweaked Senate Bill 1.

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REDUCED SAVINGS: An altered pension reform bill would still net $11 billion in long-term savings, but changes have cut into that number.

“It’s not as great as it was under Senate Bill 1 in its original form, but it’s what the amendment did,” said James McAneny, executive director of the commission.

PERC had to approve the actuarial analysis before the House could advance the bill Monday and position it for a final floor vote Tuesday, the final day of the current fiscal year.

A top priority of Republicans who control the General Assembly, the bill would move all new and public school employees into a 401(k)-type defined contribution plan similar to retirement plans used in the private sector.

The legislation originally would have increased contribution rates for current employees to maintain benefit increases that lawmakers approved in 2001. The House State Government Committee stripped that provision from the bill, perhaps heading off any litigation regarding contract impairment. PERC, though, noted such a challenge is still possible.

While the bill still nets billions in savings, that change also carved $7.9 billion from the original 30-year savings for the Pennsylvania School Employees’ Retirement System, leaving that figure at about $8.3 billion.

Savings for the State Employees Retirement System are spread out over a longer period, but would save $2.7 billion — $713 million more than the original bill did. The additional savings, McAneny said, were driven by the elimination of a reamortization of pension debt. That saved almost $5 billion, he said.

In another change, the committee also exempted about 20 percent of the commonwealth workforce from the legislation when it allowed new state troopers, corrections officers, wildlife conservation officers and others in hazardous duty jobs to stay in the current defined-benefit system.

Democrats are likely to line up against the bill. Lawmakers on the left have not embraced the changes, and Wolf, a Democrat, does not support moving new workers to a defined contribution plan, the heart the pension reform bill.

State Sen. John Blake, a Lackawanna County Democrat who serves on the PERC board, voted against sending the actuarial note on to the governor and General Assembly. His concern, he said, centered on the process — specifically, how quickly PERC had to draw up the actuarial note to get it to lawmakers in time to facilitate a vote.

“These are momentous and complex legislative initiatives that have a dramatic impact on the fiscal health of the commonwealth and on the retirement security of our workers,” he said.

The Commonwealth Foundation, a free-market think tank, has been pushing for pension reform and Nate Benefield, its vice president of policy analysis, said Senate Bill 1 is a good start, even with the changes.

“It certainly does move the ball forward. It’s a dramatic improvement,” Benefield said.

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Andrew formerly served as staff reporter for Watchdog.org.