Veto Endangers Essential Pension Reforms
1/21/2016
by State Rep. Keith J. Greiner, CPA (R-Upper Leacock)

In late December, Gov. Tom Wolf executed a line-item veto of a fiscally responsible budget that the General Assembly had sent to his desk before the Christmas holiday. Wolf cut over $6 billion from the state budget, including a $3 billion cut in education funding that will eventually impact schools across the commonwealth.

In one case, an agency saw its funding completely eliminated by the governor. This cut — overlooked by many, maybe because it is not a high dollar figure — could have catastrophic ripple effects if not quickly restored. That program is the Public Employee Retirement Commission.

PERC’s total proposed annual budget is less than 1 million dollars, but this agency provides two valuable services that impact our municipal and state pension systems. PERC provides detailed actuarial analysis of any legislation that would reform the commonwealth’s two public employee pension plans. This analysis provides lawmakers with an understanding of the net impact of any retirement benefit changes for state employees. By completely eliminating PERC’s budget, the governor is slamming the brakes on future discussions to reform our state’s retirement benefits.

With an unfunded state pension liability of more than $50 billion and growing, our pensions are in need of reform to protect taxpayers and ensure that state employees, who rightfully earned that benefit, can continue to receive it. Pensions are arguably the No. 1 factor contributing to increased school property taxes. With the Legislature’s inability to consider pension reform due to the lack of independent actuarial analysis from PERC, Wolf’s line-item veto could cause property taxes to rise, as long as pension reform remains unaddressed by the General Assembly.
The ripple effect of Wolf’s veto of PERC funds does not stop at the state level; it also greatly impacts our municipal pension plans.

As I’ve noted before, municipal pension reform is absolutely necessary to ensure the long-term economic viability of Pennsylvania’s 2,500 municipalities. From Pittsburgh to Scranton, and even in Lancaster, pension costs are destroying local budgets. I am leading the charge for municipal pension reform statewide as the prime sponsor of legislation in the House.

The second service PERC provides is to review the health of municipal pension plans. Municipalities are required to report the status of their pension plans on a biennial basis to PERC, which then reviews the information and shares it with the state auditor general’s office, which determines how much state aid a municipality should receive.

Under Act 205 of 1984, the state provides financial aid to municipalities to help pay their pension costs. If PERC is unable to review municipal pension plans, their state aid is in question. Cities, townships and boroughs count on this state aid when they budget. Lancaster city receives approximately $2.5 million in Act 205 aid.

As a part of its duties, PERC also provides independent actuarial analysis for municipal pension reform legislation as well, and without funding, it will be unable to do so.

Wolf’s veto of PERC’s $914,000 annual budget stops the General Assembly from considering pension reforms that could save the taxpayers billions of dollars over the long term. Worse yet, the short-term implications could mean millions of dollars in increased property taxes.

I do not know whether Wolf truly understood the impact of his decision to cut PERC’s funding, but there is no question that it could have catastrophic consequences for taxpayers. PERC is worth every dollar it receives, both for the assistance it provides to the Legislature and for its role in protecting taxpayers across Pennsylvania.

The General Assembly must act quickly to provide PERC with funding, so its staff can resume normal operations and provide actuarial analysis on pension reform measures being considered by the General Assembly. Legislation, of which I am a co-sponsor, was introduced last week to provide funding for PERC, and I hope the General Assembly can join together to send it to the governor’s desk with veto-proof majorities.

Pension reform, both at state and municipal levels, should be enacted as soon as possible. The stakes are simply too high for taxpayers, our schools and our municipalities. As a first step, we can return funding to PERC to allow discussions to continue.

Representative Keith J. Greiner, CPA
43rd Legislative District
Pennsylvania House of Representatives
Media Contact: Eric Reath
717.260.6187
ereath@pahousegop.com
RepGreiner.com / Facebook.com/RepGreiner
Share |