Pennsylvania unions, state to battle over proposed pension changes

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HARRISBURG -- The changes Gov. Tom Corbett has proposed for the state pension systems are still in draft form, awaiting legislative sponsorship, debate and votes.

But should the revisions to retirement benefits for school and state workers become law, the prospect of a court battle is so certain that the Corbett administration and labor unions already are discussing their cases.

From the start, public employee associations have said Pennsylvania case law prohibits the state from changing pension benefits for current workers, and they promise to sue if such a plan is signed into law.

In addition to diverting new hires to a 401(k)-style defined contribution plan, Mr. Corbett would make several changes to the benefits of current workers: Reduce the multiplier used to calculate benefits, increase the years for final average salary and limit pensionable compensation, among others.

With employer contributions scheduled to rise sharply, the administration says its proposed changes would justify deferring $175 million in state payments -- and $138 million in school district payments -- next year.

The Pennsylvania State Education Association, the state's largest teachers union, has pointed to a pair of 1984 decisions by the state Supreme Court that it says safeguard the benefits of any worker already hired. Faced with a challenge to a law raising employee contribution rates, the court found the protection of contracts in the Pennsylvania Constitution does not allow the state to unilaterally devalue employee benefits.

The Corbett administration has argued -- and did so Wednesday in a briefing for reporters -- that it will prevail in court because its proposal protects all retirement benefits already accrued.

The court views public retirement benefits as deferred compensation for services performed, creating a contractual right to those earnings, said James Schultz, chief counsel to the governor. But no Pennsylvania ruling, he said, has addressed changes that apply only to the benefits an employee has yet to earn.

"Every case that's come before our state Supreme Court has had some form of a retroactive effect," Mr. Schultz said. "The governor's present plan only applies to employees prospectively, going forward. There is no retroactive effect whatsoever.

"So when you hear folks out there saying, 'Well this issue has been determined by the court,' this is a brand new analysis for the Pennsylvania Supreme Court."

The PSEA released a statement roundly dismissing the Corbett administration's claim.

"Governor Corbett's pension proposal would change benefits for current employees," union President Michael Crossey said. "Pennsylvania's Constitution doesn't allow this, and Pennsylvania's Supreme Court has issued clear opinions rejecting unconstitutional approaches nearly identical to what the governor is proposing today."

If the plan does become law, the administration wants any resulting litigation expedited. The draft legislation contains a provision allowing a court challenge to proceed directly to the Pennsylvania Supreme Court, Mr. Schultz said.

In the meantime, the administration has shared draft legislation with lawmakers, and Budget Secretary Charles Zogby said the introduction of a bill is not far off.

A leading Republican senator on pensions, Sen. Pat Browne of Lehigh County, said he is a potential sponsor of legislation to enact the governor's plan. He said the absence of an introduced bill does not indicate a lack of enthusiasm by lawmakers.

"These are very involved, very challenging issues," he said. "The Legislature and the governor are working together on all these issues, working toward a final package. It doesn't reflect hesitation."

In the House, Rep. Glen Grell, R-Cumberland, heads a Republican task force studying the issue. Mr. Grell said he gives Mr. Corbett credit for putting forth a proposal, but that he remains wary of pursuing a fix likely to be challenged in court.

"I'm concerned about the parts of the proposal that affect current employees, not necessarily because they're unfair to ask, but because they will undoubtedly end up in court," he said. "And I'm especially concerned about doing a reduction in the employer contribution rate based upon future changes that may or may not pass a court challenge."

Mr. Grell said he would like to see state officials and union representatives try to work out a lasting pensions solution.

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Karen Langley: or 1-717-787-2141.


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