State employees, teachers angle for hikes
Taxpayers should be leery that a Pennsylvania House committee has unanimously sent to the floor a bill that would hike pension benefits for a quarter-million state government and public school employees. The move – which would also profit retired lawmakers – is projected to cost $10.4 billion over 20 years, paid for by a state government subsidy and by local school taxes. The Pennsylvania School Boards Association opposes the bill and has warned of its cost. “The question is whether or not it’s going to raise taxes, and it certainly has the likelihood of doing that,” says Tim Allwein, the association’s assistant executive director.
The Public School Employees’ Retirement System would need an estimated $348 million a year for 20 years under the bill; the higher pensions would cost the State Employees’ Retirement System an estimated $174 million per year for 20 years.
Just 16 months ago, in December 2006, The Associated Press analyzed the fallout from a 2001 pension grab that boosted legislator pensions by 50 percent and increased state worker and teacher pensions by 25 percent. By 2012, the cost of subsidizing those hikes was estimated to triple, from $1 billion to $3 billion a year.
The AP series noted that the average pension in those two systems then approached $20,000 per year – three times the typical private pension benefit, and about a third higher than the national average for a government pension.
Also, whenever investment returns for those pension funds falls short of their 8.5 percent annual target, the difference is added to “employer share,” which is paid mainly with state and local tax funds.
In 2002, lawmakers and then-Gov. Mark Schweiker, responding to pressure from retirees left out of the deal in 2001, granted them a cost-of-living increase estimated at $1.7 billion. The following year, as state government and local school districts were going to be hit with a huge increase in their mandatory pension payments, Gov. Ed Rendell and the Legislature took the easy way out, postponing most of that payment for decade.
What this all means is that the taxpayer, and particularly the school district taxpayer, hasn’t yet picked up the tab for the last state employee and teacher pension hike. Now those employees and their statewide organizations are angling for more, saying six years is too long to go without a cost-of-living hike in their public pensions.
Supporters of the proposal note that the pension funds earned 13.8 percent and 17.2 percent last year, even in a weak stock market. But they forget that stock market performance is not guaranteed, as everyone found out when the market tanked after the 2001 pension hikes. When that happens, the taxpayer – at the state and local levels – will be expected to make up the loss.
In addition to getting pensions that far eclipse those offered in the private sector, most state employees get health care as a retirement benefit. Teachers have more limited coverage, but they can retire after 30 years.
The plan approved Tuesday by the House State Government Committee is based on a bill introduced by state Rep. Steve Nichol, R-York, an authority on pensions and a member of the teacher pension board. He called it “an opening gambit, so to speak,” and noted that six years in the longest time for retirees to go without a cost-of-living increase since the early 1970s.
But back in 2006, here’s what Nichol was saying about the pickle the state was in arising from its 2001 and 2002 pension hikes: “We’re it’s going to hit the pockets of taxpayers is at the local school level. Anything we do as tax reform, as significant at it is, could be just totally rendered useless when this (need to foot the bill) hits.”
The last thing taxpayers, and particularly property owners, need is another big debt to pay off.