Public Pension System: Pennsylvania’s Titanic
7/8/2013
The problem with government debt is that at some point the creditors will expect to get paid, and when they demand payment, Pennsylvania’s taxpayers are on the hook. Pennsylvania’s two public pension systems, the State Employees’ Retirement System (SERS) and the Public School Employees’ Retirement System (PSERS), are currently $47 billion underfunded. For perspective, the 2013-14 Commonwealth General Fund budget is $28 billion. It is undeniable that this liability is unacceptable.

The very nature of a system that allows for politicians to make alterations for political gain is reason enough to fix the system. Allowing for a system that relies on an annual 7.5 percent investment return in order to remain solvent is foolish and an irresponsible gamble with taxpayers’ money. Ultimately, if that 7.5 percent return is not realized, the people handed the bill are again, the taxpayers.

Special interests are saying that the retirement system for public employees should not be structured in the same fashion that the taxpayers in the private sector fund their retirement. For some reason, some lobbyists, unions and special interests feel that those who derive their paycheck from the taxpayers deserve a retirement system that is vastly different from those who ultimately fund the public system.

Over the past several decades, businesses, including those in this area, have converted their retirement plans to defined contribution plans. Private industry is not able to pass the unpredictable costs of defined benefit retirement plans to their customers, while the public system in Pennsylvania is able to pass costs onto the taxpayers through increased taxes.

While some say let Act 120 work, Act 120 is itself, although billed as pension reform when signed into law a few years ago, is a political ploy meant to push the responsibility past another election cycle, not to address the root cause of the crisis. Nothing in Act 120 relieves the taxpayer from guaranteeing the system if an indefinite 7.5 percent annual rate of return is not realized.

The system is fundamentally broken. Enrolling future employees into this insolvent system and expecting to save it is the equivalent of adding passengers to the Titanic to keep it from sinking.

Representative Fred Keller
85th District
Pennsylvania House of Representatives

Contact: Ty McCauslin
(717) 772-9979
RepFredKeller.com
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