Philadelphia, June 13–Working under the aegis of Temple University’s Center on Regional Politics (CORP), a group representing bipartisan elected officials and business, labor, civic, and academic organizations today issued a report identifying options to help the Commonwealth of Pennsylvania and many of its municipalities and school districts meet severe public pension funding challenges.
The report is the product of eight months of discussions by members of CORP’s Public Pension Working Group, which also included individuals with legal, public finance, and pension fund expertise. Their work was supported by meetings with state and local budget officers, pension fund executives, and consultants, and by research conducted by CORP’s staff.
The full report entitled, “What To Do About Public Pensions: Options for Funding and Reform,” is available online. It includes a list of the working group members. Also online is CORP’s Spring-Summer Bulletin, which summarizes the pension report as well as last month’s symposium on Philadelphia tax policy co-sponsored with The Pew Charitable Trusts.
Although the report discusses options that some members oppose, the group as a whole felt that its work should be made available to policymakers and the public to inform current debates about public pension issues. According to their latest valuation reports, the Commonwealth, its school districts, and its counties and municipalities face unfunded pension liabilities of more than $50 billion.
The report identifies and discusses options in three broad categories: obtaining new resources, reducing pension costs, and exploring innovative paths to meeting pension reform and funding challenges. In addition to options already being debated in Harrisburg and elsewhere, the report suggests several ideas not currently under consideration.
Among ideas under the category of obtaining new resources, the report suggests that the Commonwealth and school districts could achieve substantial savings by consolidating school health care plans into statewide or regional systems and use the savings to help fund pensions. The report also suggests that Philadelphia ask the legislature to authorize City Council to extend a one-percent sales tax due to expire on June 30, 2014, and dedicate the $130 million in revenues to help pay down the City’s $5 billion in unfunded pension liabilities. Any tax extension should be contingent on changes that put the City’s pension system on a sustainable course for beneficiaries and taxpayers going forward, according to the report.
Under reducing pension costs, the report discusses Governor Corbett’s proposal to change new state and school employees to a defined-contribution pension system as well as the opposing argument by Democrats and labor leaders that previously enacted pension reforms should be given more time to work. Noting that state subsidies of thousands of municipal pension plans can now be used to pay for administrative costs as well as benefits, the report suggests requiring municipalities to pay for the administrative costs, thereby increasing accountability to taxpayers and creating incentives for consolidation.
The report also suggests that legislative leaders consider “stacked hybrid” plans that provide workers with a defined-benefit up to a predetermined salary and a mandatory defined-contribution benefit above that threshold. Under the category of exploring innovative paths, the report describes how a task force of elected city and state officials and business and labor leaders built consensus for labor contract changes and legislation that led to dramatic improvements in the funding of the Louisville, KY, police and fire pensions.
The report concludes with the observation that it is the product of an informal study group, not an advocacy organization, and therefore it will be up to elected officials and public and private sector leaders to decide whether individual options should be pursued.
Temple University established the Center on Regional Politics to provide elected officials and other public and private sector leaders with a forum to seek consensus on policies to improve the quality of life and economic opportunities for the residents of Philadelphia, Bucks, Chester, Delaware, and Montgomery Counties. The center is supported by Temple and by the William Penn Foundation.
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