Reforming the state's public pension problems will mean refraining from the old politics of managing retirement systems and acknowledging that the status quo is no longer sustainable.
Rick Dreyfuss, a business consultant, actuary and a senior fellow with the Commonwealth Foundation, took time to dissect the state's principle retirement funds.
"The question is what are we going to do about it?" Dreyfuss asked those attending the Pennsylvania Economy League luncheon Wednesday at the Williamsport Country Club.
Statewide, the debt for pensions set aside for public employees and teachers comes to more than $20 billion, an amount that must be paid for by local school districts and municipalities.
That total, which could triple in the next several years, resulted over the years from increasing pension benefits, deferred costs and bad market conditions.
Dreyfuss said he favors stopping some of the bleeding, in part, through a defined contribution plan for all new state employees, similar to a a 401(k) plan.
Under the existing defined benefit plan, certain levels of benefits are promised to government employees when they retire.
Unfortunately, Dreyfuss said, Gov. Ed Rendell has proposed reducing contributions to the Public School Employees' Retirement System over the next 10 years and diverting the funds to the state's basic education needs, a move that would only further defer costs.
That pension fund, along with the Pennsylvania State Employees' Retirement System, lost more than 25 percent in a single year.
To make up the dollars, homeowners will see an average increase of $385 per year in real estate taxes, he noted. State sales and personal income taxes also may need to be hiked.
Dreyfuss called for reforming current pension benefits, in part, by redefining eligible earnings, increasing the normal retirement age, curtailing early retirement subsidies, and eliminating cost of living allowances.
He said the state has the most pension plans of any in the U.S.
Statewide, big cities such as Philadelphia and Pittsburgh as well as smaller municipalities all are facing pension problems.
"We are a case study of what needs to be done," he said.
Too often, officials make the mistake of comparing their own pension funding problems with those elsewhere facing bigger debts. Such thinking prevents any resolution.
Dreyfuss said everyone must understand they have a stake in funding the state's pensions.
