Gov. Tom Corbett and his legal staff are hoping fine distinctions in Pennsylvania case law will allow $12 billion in cuts to future pension benefits for more than 370,000 current state and school employees.
Mr. Corbett and state legislators are grappling with Pennsylvania's unfunded pension liability of $41 billion, and the governor is taking an approach never before tested in state courts in hopes it will help the benefit reductions pass constitutional muster.
"We've designed our proposal in a way we believe it is constitutional, knowing that the likelihood is that that issue will ultimately be litigated in the courts," state Budget Secretary Charles Zogby said.
More than a month after Mr. Corbett announced his plan, drawing threats of lawsuits from labor unions, the legislative response has been cool and no bill has been introduced.
The benefit cuts are the main source of savings in Mr. Corbett's multi-pronged pension reform package and are expected to save an estimated $12 billion over 30 years. The package also would require new hires to enroll in a 401(k)-style plan, instead of the traditional plan and temporarily limit annual increases in taxpayer contributions.
The governor proposes freezing benefits for current employees and replacing them with reduced benefits in 2015. When workers retire, they would receive the combined value of both sets of benefits.
Union leaders who have led the fight against the pension cuts said the novelty of the administration's approach doesn't fundamentally change the facts.
"Their legal theory doesn't make any sense to me," said Lynne Wilson, general counsel for the Pennsylvania State Education Association, the state's largest teachers union.