Posted on 11/07/2013 11:50:41 PM PST by Cincinatus' Wife
Is your family ready to lose a mortgage payment or give up cellphone service for increased property and state taxes? Or would you rather see 33,000 public school teachers in Pennsylvania — nearly one out of every three — lose their jobs? With pension costs set to drive up the average family's taxes nearly $900 annually, those are the harsh choices Pennsylvanians face unless we demand reform now.
The state's two pension systems, for state government workers (SERS) and public school employees (PSERS), have more than $47 billion in debt. It's a shortfall that taxpayers must cover. And the bill is quickly coming due.
Current projections show that state and school district contributions will increase from $2.5 billion in 2012-13 to $6.2 billion in 2016-17, representing $877 per Pennsylvania household or the salary of 33,000 teachers. Clearly, we can't afford to simply do nothing.
School pension costs are split between school districts and the state, with some districts hit harder than others. In Allegheny County, yearly property taxes per homeowner are expected to jump between $192 in South Allegheny and $435 in Upper St. Clair just to pay for rising pension costs.
Finding the right solution requires examining how we got here. In 2001, lawmakers retroactively increased benefits for themselves and state and school employees. The following year, the Legislature passed a cost-of-living adjustment for retirees. Both increases added billions to our pension debt.
Major stock market losses during recessions in 2001 and 2008 added tens of billions more in pension debt. Following these stock market declines, lawmakers voted to defer payments to avoid tax hikes — shifting these costs, with interest, into the future. These three factors — investment losses, underfunding and benefit increases — created this crisis.
The origins of the crisis show why the current system is flawed. First, defined-benefit pensions create perverse political incentives. It makes political sense to increase benefits for current workers (voters) and transfer costs onto future generations. The consequence? A child born today will be paying for our pension deficit well into adulthood.
Further, forecasts of pension costs are just estimates. When these guesses prove wrong — as they have often over the past few years — taxpayers end up owing more. A lot more.
The first step to fixing this crisis is to put new employees into a 401(k) model, also called a defined-contribution plan. This plan puts a portion of workers' salaries toward retirement and taxpayers contribute a set amount.
Defined-contribution plans would get politics out of pensions. Because funds are deposited into an employee's personal account, it becomes impossible to increase benefits without paying for them. Such a transparent plan prevents the political manipulation that has plagued traditional pensions.
Moreover, younger workers especially would benefit from the ability to take a 401(k) with them as they change jobs.
Once we stop growing our pension debt, we can find a reasonable plan for paying it off. It must include curtailing the growth of other state spending, adopting cost-saving measures like prevailing-wage reform and prioritizing pension payments.
Our pension crisis requires immediate action by lawmakers, as doing nothing again only allows the problem to get worse.
Why do taxpayers have to cover the shortfall?
The ultimate goal would be to privatize the government schools.
If politicians can do that with health insurance, why can't they do the same with union pension plans?
HA, HA!!! Lots of luck in trying to sell this to the politicians.
present workers must not be allowed to start collecting until age 60 or 62.....
govt work is far and above better pay and better work hours and better benefits and pension than nearly all private employee jobs.....
its time they faced reality....
>> Our pension crisis requires immediate action by lawmakers,
Lawmakers? More like law breakers...
The communities must come together and make the tough decisions about what they’re willing to shell out in order to salvage the broken promises. Too many sweetheart deals were made by corrupt politicians that should otherwise be hanging from the gallows.
This must be corrected locally. Enough with the national-level bailouts.
How do you “lose” a mortgage payment”
More like you “lose” your home
and they are not talking one mortgage payment, they are talking one a year, to pay an annual tax increase
I agree! Why do taxpayers have to pay for the excesses of politicians and governmental officials who decided to raise pension payouts?
Because elections (over decades now) have consequences.
“Current projections show that state and school district contributions will increase from $2.5 billion in 2012-13 to $6.2 billion in 2016-17, representing $877 per Pennsylvania household or the salary of 33,000 teachers. Clearly, we can’t afford to simply do nothing.”
I’m not an expert on Pennsylvania schools, but I’ll bet there are several hundred administrators or other useful twits that could be sacrificed instead of teachers. It’s fer the chilrun
“I’m not an expert on Pennsylvania schools, but I’ll bet there are several hundred administrators or other useful twits that could be sacrificed instead of teachers. It’s fer the chilrun”
Here in NJ many administrators have already been laid off (they had no union to protect them); we’ve laid off new teachers, and have even begun laying off tenured teachers. The fact is that if teachers want 5% raises while we have a 2% property tax cap, either the senior teachers give concessions to save newer ones, or the newer ones get the ax. Because of the strength of the teachers’ unions, cops and firefighters have been sacrificed as well to keep those high annual increases for teachers coming.
The teachers’ unions are the true owners of the Democratic Party; Obama can be talking about raising the Titanic and he still has to throw in something about adding “100,000 new teachers”. FWIW, Governor Christie is vilified by the teachers for a reason; whatever people may say about him, in a state like NJ he has all the right enemies.
Well, lawmakers can retroactively CUT benefits, too, rather than further burden taxpayers. PA median income is about $52k/year. Every pension above that should be cut to that amount.
BINGO!
But they won’t.
Scott Walker fought that fight in Wisconsin. Teachers did NOT want to give up their taxpayer subsidized pension/healthcare to help other teachers remain employed. Walker and the Republican controlled state house showed them the way. But they had to fight union leadership, the roving Democrat Party thuggery machine and the MSM misinformation blitz to do it.
The $47 billion dollar unfunded liability is based on an annual rate of return of 7.5%; I don’t believe PERS or SERS has averaged 4% over the last five years, despite the general market performance. Assuming a more realistic return rate of 3.5%, the impact of this debt will be catastrophic. This has been known since 2008, and still NO ACTION. I think bankruptcy will be the solution, based on the power of unions here. We see what is happening in Detroit, 17 cents on the dollar for unfunded portion of pensions for retirees, hope all those retired teachers in PA are paying attention, because without reform, this is your future as well, despite the union promises to the contrary.
You are assuming that communists care about debt. They don’t. Debt is a tool they are using to deliberately destroy us—to collapse our capitalist system and create a “workers’ paradise”.
Scott Walker did a good job; here in NJ it helped that one of the papers (Asbury Park Press) publicized the salaries of all public school teachers in the state (as public information). After that, taxpayers were enraged; a kindergarten teacher in a neighboring town was getting $82K (she was around 45 years old; imagine what she’ll cost in 20 years). The lie about “underpaid teachers” was exposed as exactly that.
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