Reform falls short
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While it is easy to empathize with those who are struggling financially due to the tough economy, that compassion is not warranted toward the governor, state Legislature or state employees struggling with their big pension mess. The governor's timid proposals, if enacted, will make only a small impact on the cost of the system. The employees are reacting as though the proposed benefit reductions are draconian. Legislators from both parties are pushing to dilute the reforms.
Let's briefly review how we got into this mess. At the stock market peak in 2000, legislators raised retirement benefits 25 percent (from 2.0 percent per year of service to 2.5 percent) for state employees, and themselves. They legislated a change in the accounting for pension cost to delay recognizing the true expense for 10 years. When the investment markets disappointed, raising the funding need, the state did not deposit the required money. Lawmakers passed reform legislation in 2010 (Act 120) that again attempted to kick the cost can down the road.
True reform would involve, first, reducing the benefit accrual for future service for all current and future employees back to the 2.0 percent level, which is fair and competitive. West Virginia and New York are at 2.0 percent. Second, honestly account for the cost of the pension benefits, using established actuarial methods and realistic assumptions. The debt is much bigger than the $40 billion admitted. Finally, the state should pay the required cost, no matter how inconvenient.
Will they fix it this time? We can only hope.
DAVID T. JACK
First Published February 14, 2013 12:00 am