By Melissa Daniels | PA Independent
HARRISBURG — No laws have been changed, and no legislation is even introduced, but Gov. Tom Corbett’s administration is already defending its pension plan.
Public sector unions promise to challenge the proposal. The plan, they say, is unconstitutional.
The administration made pension reform a top legislative priority this year, with the goal of getting a slew of funding and benefit changes passed by the next fiscal year, which starts July 1.
The plan, in part, reduces future benefits for current employees, and that upsets the unions. But those reductions make up most of the nearly $12 million in projected savings over 30 years, according to the plan.
Chief Counsel Jim Schultz heads the state’s Office of General Counsel, which would defend the law in court, should it come to that. Schultz is confident the state’s proposed changes will withstand judicial scrutiny, he told reporters Wednesday.
Schultz said the courts would employ a “contract impairment analysis” to determine whether the changes are constitutional. That comes down to whether the state had a good enough public policy reason to change its agreement with employees.
“I think it’s undisputable we have this important public purpose,” Schultz said, noting the $41 billion in unfunded liabilities the two state pension systems now carry.
The court’s analysis would involve deciding whether amending future pension benefits violate the agreement the state has with its employees. If that agreement has been impaired, the court would then look at whether the state had a pressing enough reason to make the change.
Schultz said even if the courts find the administration impaired its contract with employees, the pension problem is a compelling enough reason to allow the changes. He dismissed the claim that courts have already determined future benefit reductions unconstitutional, calling this proposal a brand new case.
“The Pennsylvania Supreme Court has not had a plan similar to the governor’s plan before it when it’s evaluated or gone through contract impairment analysis,” Schultz said.
Past cases, he said, involved changes to already-earned benefits. The plan on the table exclusively changes prospective ones, and it does not touch what’s already earned.
Others offer different interpretations.
Stephen Herzenberg, executive director of the Keystone Research Center, said Corbett’s pension proposal makes unconstitutional changes — and would wind up costing taxpayers more down the line by putting new employees on defined contribution plans.
He said the administration is out on “a legal limb” by defending its proposal.
“You can talk about pension contributions going forward and benefits going forward, but the courts have been clear,” Herzenberg said. “The pension contract is a career-long contract. It’s a package deal, so you don’t change the package unilaterally part of the way through.”
“Here are the facts. Gov. Corbett’s pension proposal would change benefits for current employees,” President Mike Crossey wrote. “Pennsylvania’s Constitution doesn’t allow this, and Pennsylvania’s Supreme Court has issued clear opinions rejecting unconstitutional approaches nearly identical to what the governor is proposing today.”
The argument is likely to heat up even more before June 30, as next year’s budget relies on passing the Corbett proposal. The plan limits the state payments into the plan from 4.5 percent annual growth to 2.25 percent annual growth. This would generate $175 million in savings for this year’s budget, and more over the next five years, which means failing to pass reform of any kind before June 30 would prove problematic, said Budget Secretary Charles Zogby.
Legislation outlining Corbett’s pension proposal is expected to be introduced as soon as next week, Zogby said.
“I think it’s imperative we leave here in June with something on pension reform that’s going to deal with the immediate effects of this coming budget, as well as the coming budget years,” Zogby said.
Contact Melissa Daniels at [email protected]