State pension ‘crisis’ is self-inflicted
Fall carries with it football season, beautiful changing foliage, and now annual attempts by parties within Pennsylvania’s Legislature to dismantle the statewide pension system for public employees. It’s not a hard battle for our elected officials to fight, as they automatically have many private sector citizens outside of the pension plan in their corner by default. And sharing long-term projections over future pension debt incurred by the state only cements their position.
But the clever slight-of-hand to this autumnal straw man is the Legislature masking the true cause of pension problems. While officials place the entirety of blame on thousands of hard-working employees who have quietly paid into the fund for decades, the reality is that the fund was not in any financial danger until former Gov. Tom Ridge’s 8 years in office. Instead of providing school districts across the state with needed funding, Ridge simply recused all 500 districts from paying their pension obligations!
So, employees continued to have pension monies deducted from their paychecks, yet their savings never made it into state pension coffers. School districts used their funds for other projects as they saw fit. Coupled with a market slowdown after the boom years of the tech-heavy late 1990s, the fund suddenly found itself behind projections. Imagine you and a friend carefully saving money when you both begin working in your early 20s. Then for a period, your friend stops saving, and spends lavishly on possessions he or she doesn’t need. He or she returns to their senses by their early 30s and begins saving again, but are now upset because their nest egg isn’t caught up to yours- and never will be.
This is not unlike what is happening to Social Security at the Federal level today. Perhaps created with good intentions, the fund was doing so well that Congress couldn’t keep their hands off of it, and began to borrow from Social Security to pay for other ventures, filling the fund’s coffers with “IOUs” where money once was. Americans continue to pay into Social Security, but slowing U.S. population growth- coupled with far few people wanting to work, and others beginning to draw from the system as soon as they leave high school without ever contributing to it- the fund is being depleted far quicker than it can be replenished.
According to the Social Security’s own website, by 2035, taxes will only be able to pay for 75% of scheduled benefits- and even that is an optimistic projection. As a middle-class working family, my wife and I are saving independently, as we assume the system will be unable to sustain us upon reaching retirement. So for me, Social Security is just another tax I pay to the government. In 2010, the Pennsylvania State Education Association (PSEA) surprised teachers and elected officials across the state by working with the Legislature toward pension reform, and supported a bi-partisan passage of Act 120, which will result in $25 billion in future pension benefit cost savings. But a faction of state legislators were not content, and continue to propose annual pension assaults ever since, despite new employees now having less benefits, having to pay more into the fund to access those benefits, and working longer to a raised retirement age. The current proposal before the Pennsylvania Legislature would drop the state into the five worst pension plans nationwide. So it’s difficult for organizations like PSEA to have faith in some lawmakers, who continue to attack employee pensions even after PSEA worked with them to fix it.
The wolf-in-sheep’s-clothing regarding these proposals is transitioning new employees into 401(k)-type pensions. Healthy pension plans require a steady flow of new workers to replace those lost to retirement. So if signed into law, current employees on the state’s defined benefit plan would retire, and have nobody to replace them. This would immediately make the system volatile, and raise taxes for Pennsylvania to meet its pension obligations. This would prompt public outcry, which legislators would then use as justification to destroy the plan entirely. Thus, these new proposals are not legitimate “reform,” but rather intentional means of rendering the plan permanently insolvent, under the guise of “protecting taxpayers.” This endless assault on hard-working families has already inflicted collateral damage on Pennsylvania’s teachers. 62% few residents are now seeking teacher certifications. 78% fewer teachers are pursuing additional certifications. Districts across the state are struggling to fill daily voids with substitute teachers, because so few now view teaching as a viable long-term career.
So in the end, those most affected by this battle are children, who are our most precious commodity. I long for a time when children across Pennsylvania are again valued, and fostering quality schools for them is viewed as a priority.