Tom Corbett: Changing Pa. pension plans only way to end crisis

June 17, 2013

Since taking office as governor, I have made public pension reform one of my top legislative priorities. Pennsylvania is in the midst of a pension crisis.

Pennsylvania's two public pension systems, the State Employee Retirement System and the Public School Employees' Retirement System, are badly in debt. This is a problem that was waiting for me when I took office, but one I am determined to fix.

How bad is the problem? At the end of 2011, both systems had a combined debt of $41 billion. At the end of 2012, it had increased to more than $47 billion. This equates to an increase of more than $6 billion in one year, $510 million each month, or nearly $17 million each day.



For example, for fiscal year 2010-11, the commonwealth's general fund contributed $518 million in state taxpayer dollars to SERS and PSERS. By fiscal year 2017-18, that contribution is expected to rise to $3.359 billion, a staggering 548 percent increase.


At its core, the root cause of the public pension crisis in Pennsylvania is the type of plan afforded to state and public school employees, which is called a defined-benefit plan. This plan is archaic by today's standards, because it guarantees public employees a specific benefit upon retirement, regardless of investment performance.

By contrast, most workers employed in the private sector have a defined-contribution plan, commonly referred to as a 401(k), or no retirement plan at all. Under a defined-contribution plan, retirement benefits are determined by employer and employee contributions and the actual return earned on investments.

Under my pension reform plan, new state and public school employees will be enrolled in a defined-contribution plan, rather than a defined-benefit plan.

In my view, conversion from a defined-benefit plan to a defined-contribution plan is the most responsible way to provide an adequate retirement for state and public school employees, while shielding the taxpayers from bearing the burden of contributing billions to help balance an outdated and expensive defined-benefit plan that has become increasingly rare in the private sector.


So count me in. As governor, I pledge that if the General Assembly passes pension reform, I will gladly join new state and public school employees as a member of the new defined-contribution system.


Tom Corbett is governor of Pennsylvania.

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