Pennsylvania governor refuses to sign state budget without pension cuts

By: James Comtois

Published: July 1, 2014 - Pensions & Investments

Pennsylvania Gov. Tom Corbett refused to sign the $29.1 billion state budget plan for the 2014-2015 fiscal year passed Monday by the General Assembly because it did not address pension costs.

gThe budget c does not address all the difficult choices that still need to be made,h Mr. Corbett said in a statement issued by his office. gIt leaves pensions, one of the largest expenses to the commonwealth and our school districts, on the table, leaving the weight on Pennsylvania taxpayers.h

He added that the costs of pensions gare consuming more than 60 cents of every new dollar of general fund revenues.h

Pennsylvania state Rep. Mike Tobash said in a telephone interview that the budget allocated $700 million more to the $27 billion State Employees' Retirement System, Harrisburg, than the prior year and $600 million more to the $50.4 billion Public School Employees' Retirement System, Harrisburg.

gThe governor wanted pension reform completed prior to signing the budget. The House passed a budget (on June 30), and the governor has not yet signed it because it didn't have the piece that he asked the Legislature to accomplish,h said Mr. Tobash, who earlier this year presented an amendment to a bill sponsored by state Rep. Warren Kampf to reform Pennsylvania's state pension system that Mr. Corbett supported.

Mr. Tobash's amendment to HB 1353 proposed that all new employees who enter the state pension funds would be enrolled in a hybrid defined benefit plan and 401(k)-type defined contribution plan. The bill has been put in committee and has been gtaken off the table,h Mr. Tobash said.

Pennsylvania's unfunded pension liability is set to grow by 38% to $65 billion in 2018, according to state estimates. The Public School Employees' Retirement System was 59.2% funded as of Dec. 31, and the State Employees' Retirement System was 66.3% funded as June 30, 2012, according to the most recent annual reports of the Harrisburg-based pension plans.

Jay Pagni, a spokesman for the governor's office, did not return calls by press time.

Bloomberg contributed to this story.