Pennsylvania is heading toward a crisis in funding retirement benefits for lawmakers, judges, teachers and other state employees and should consider reducing pension and retiree health care costs, a study released yesterday said.

The Commonwealth Foundation, a Harrisburg-based public policy group that believes in personal responsibility and limited government, said Pennsylvania's public employee benefits are more generous than those offered by most other states and private industry. High-ranking judges with 30 years' service, for example, can retire at 60 and receive a pension benefit that's the same as their paycheck, the report said.

"These benefit plans are operating in a vacuum and without regard to either the taxpayer or global economic realities, which puts taxpayers in financial jeopardy," said Rick Dreyfuss, a former Hershey Co. executive who wrote the report.

The foundation's recommendations take a page from what more U.S. companies are doing: eliminating their pension plans and replacing them with 401(k) plans that put the onus for retirement saving on the individual, not the employer.

State workers should also pay more for their health care coverage and retiree health benefits should be reduced, the foundation said.

A spokesman for organized labor said the proposals would severely reduce benefits for dedicated public servants.

"Before we slash and burn their health benefits and retirement security, we should look at other alternatives," said Michael Leone, a spokesman for the SEIU Pennsylvania State Council. "We're very skeptical of the methodology of the report and certainly the conclusions."

Robert Gentzel, a spokesman for the Pennsylvania State Employees' Retirement System, declined to comment on the report.

The $29 billion pension fund earned a return of 14.9 percent last year and was 96 percent funded at the end of 2004. That means it has 96 cents for every $1 in retirement benefits retirees and active workers have earned.

State pension plans are more generous than private industry plans because the government can't compete with private sector wages and salaries. Instead, it offers better benefits, including cost-of-living pension adjustments that increase benefits even after a worker retires. They also have much more generous provisions for early retirement benefits, said Frank Reagan, senior retirement consultant for the human resources consulting firm Watson Wyatt.

"Those are things you're never going to see in the private sector, but they're very common in state plans," he said. "They typically get pretty nice retiree health care, much nicer than we see out there in the private sector."

Pennsylvania lawmakers have enhanced pension benefits and, in recent years, approved cost-of-living increases, actions the Commonwealth Foundation said increased the burden on taxpayers. Meanwhile, retirees pay little, if anything, for lifetime health care coverage, another area where costs are escalating, Mr. Dreyfuss said.

While much of the anxiety over the nation's retirement crisis has been riveted on industry pension plans, they are generally better funded than state and local government plans, according to the consulting and investment advisory firm Wilshire Associates. It said the pension plans of companies in the Standard and Poor's 500 were 92 cent funded at the end of 2004, while state retirement funds were only 81 percent funded.

Moreover, higher pension costs, compounded by escalating costs for Medicaid and education, are straining the credit ratings of some states, according to a report issued yesterday by rating agency S&P. Lower credit ratings increase borrowing costs for state governments.

The ratings agency said Pennsylvania's two retirement plans -- the $29 billion State Employees' Retirement System and the $53 billion Public School Employees Retirement System -- were nearly 93 percent funded as of 2004.

But the Commonwealth Foundation projects taxpayer costs to support the two state pension funds will increase from $693 million in the current fiscal year to $4.7 billion by 2015-16. That assumes the funds earn annual returns of 8.5 percent. Taxpayers will pay less if the funds earn more and more if the funds earn less.

Some states faced with pension deficits have tried switching to defined contribution plans with mixed results.

Alaska, where pension funds covering state employees and teachers faced a $5.7 billion deficit, stopped offering pension plans to workers hired after June 30. Instead, they'll be covered by a defined contribution plan similar to a 401(k) plan. The state will contribute to the individual accounts, but it's up to employees to invest the money wisely.

California Gov. Arnold Schwarzenegger proposed a similar measure, but state lawmakers blocked the move.

West Virginia transferred teachers to a 401(k)-like account in 1991 when its pension plan faced a $5 billion deficit. Recently, the state decided it would be cheaper if teachers were given a pension instead, even though S&P says West Virginia's state-sponsored pensions plans were 44 percent funded as of 2004.

West Virginia's private account plan carried significantly higher costs than the traditional pension plan, according to The National Conference on Public Employee Retirement Systems, an organization of public pension funds. Those costs include setting up the private accounts and educating workers how to use them.

The group opposed Mr. Schwarzenegger's proposal, arguing replacing pensions with individual accounts will result in higher costs for taxpayers and bureaucratic chaos. Even under the most optimistic assumptions, the state would not have seen any savings for at least 10 years, the group said.