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Sunday With Ferris

Underdog candidate for Pa Governor, Sam Rohrer, had some straight talk about the looming ‘Pension Bomb’ at recent debate in Yardley, Pa. Ignoring potential Federal tax shenanigans for a moment, Pennsylvanians are facing a dramatic uptick in taxation at the state level due to breathtakingly unsound fiscal policies put in place in 2001.

The current edition of Back Channels clearly explains how we arrived at this ticking time bomb:

Here’s how the mess began: Starting in 2001, with a surplus in state pension funds – for teachers and for state employees – Harrisburg embarked on a series of fiscally irresponsible moves that essentially increased benefits but lowered contributions. Worse, contributions went on a payment plan equivalent to an adjustable-rate mortgage that starts with a low interest rate but mushrooms for most of the life of the loan.

Early on in Harrisburg’s pension-fund restructuring, employer contribution rates were at 5 to 7 percent of payroll for about 10 years. But starting in 2014, according to the Commonwealth Foundation, the contribution rates for school districts will climb to 33 percent, and stay above 30 percent for almost 10 years. They’ll drop after that, but not below 24 percent.

What does this mean to Joe and Jane taxpayer in Pennsylvania?

The cost to households goes from $212 this year to more than $2,000 by 2019, the Commonwealth Foundation estimates.

Understand the above amount is based upon the taxpayers shouldering the entire burden without the state taking any steps to correct this situation. So far, nothing has been proposed by Harrisburg and the clock is running.

Sam Rohrer has promising ideas:

One, put all new state hires on defined-contribution pension plans, such as a 401(k), instead of defined-benefit plans – the current system.

Two, reduce all pension enhancements – from vesting periods to multipliers to raises – to pre-2001 levels. While some argue that salary and compensation packages for state workers can’t be cut – as decreed by state judges who benefit from any increases – Rohrer says the state must reduce future obligations, while meeting any accrued since ’01.

“There’s no way to deal with this issue significantly without rolling back benefits on the front end, at least for those not yet retired,” he says.

State GOP straw poll results were released recently and unfortunately Rohrer’s ideas may only be his own:

PA GOP Caucus Straw Poll

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One response to “Sunday With Ferris

  1. says:

    Tania, I’ve been thinking an awful lot about the time bomb of the public pensions, especially because all of the local school boards are floating tax hikes this year. The public does not fully grasp the the ramifications of this mess. Kudos to Rohrer for meeting it head on instead of passing it along like so many other politicians (hello, social security anyone?) and of course, Kevin Ferris is the bomb.

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