Of the three major initiatives that were not included in the $28.376 billion state budget passed on June 30 - transportation, privatized liquor system and pension reform - the most difficult and sweeping challenge is pension reform, state Rep. Garth Everett, R-Muncy, said Monday at a Williamsport Rotary Club meeting at the Genetti Hotel.
While the two pension systems for school and state employees, Public School Employees' Retirement System (PSERS) and State Employees' Retirement System (SERS), currently do have sufficient funding, Everett said, that won't be the case in the next few years. Looking at a 25-year range, the systems are underfunded by $47 billion, due to the rate of contributions and retirements.
Poor legislative decisions in 2000 and an economic downturn left a tremendous deficit in pension funding.
State Rep. Garth Everett, R-Muncy, speaks about the state budget at a Williamsport Rotary Club meeting Monday.
"If someone knows how to pay that off with a $28 billion budget, (let me know)," Everett said.
He warned the problem will hurt school districts most and will "choke out other programs."
Everett claimed another issue is "pension spiking," where employees work a great amount of overtime toward the end of their career, which increases the amount paid out in retirement.
"They can end up with a higher base salary than their bosses. ... It costs the whole system money," Everett said.
Everett promotes changing the pension system to a defined contribution plan, which he called a "fair retirement system for school and state employees," and would apply only to new hires going forward.
Currently, he warned, the state is the guarantor for the funding. "We are on the hook to pay," he said. With the defined contribution plan he advocates, "What you pay (into the system) is what you get, and the state's not on the hook."
He proposed that "if it's good enough for private industries, it's good enough for us."
He added looking into bonds might be another option.
Everett claimed it was due to "large, powerful unions" pension reform did not pass. He promised the state House would pursue the issue again in the fall.
Everett said he thinks the transportation issue looks more promising to reform since everyone has a vested interest in it and there is a separate transportation budget from the General Fund budget.
"Roads and bridges are falling apart," he said.
As for privatizing the liquor system, he said Pennsylvania is the only state besides Utah to have it state run. He noted the major benefit of transitioning out of the state liquor system is adjustable taxes, which would generate more cash flow, plus the convenience.
"Private industry is supposed to be more efficient," he said.
He argued the core function of government is to ensure the health, safety and welfare of its citizens. "Alcohol is not in the Constitution," he said.
The stringent liquor laws are a remnant of Prohibition. "Private entrepreneurs will do a better job," he said. He said Washington state's private liquor prices are less expensive than state-run stores.
"We're not trying to promote alcohol, it's just a government issue: Should we be in that business," Everett said.
The good news about the budget, he said, is the General Fund spending at the proposed amount represents a $645 million or 2.3 percent increase over 2012-13 available funds.
"Since 2008, we've been limping. Now, we have a small increase in revenue," he said.
Everett said there are six final budget funds priorities in the state House: education, health and human services, environment and agriculture, public safety, job creation and the economy, and government transparency and accountability.