For reasons that remain obscure, everyone loves talking about zombies. For reasons a bit more obvious, everyone loves loving bacon. Meanwhile, if there’s one thing nobody loves talking about and nobody loves loving, it’s pension reform. But zombie pensions are eating your bacon, so listen up!
The Commonwealth operates two pension programs for state workers and educators: the State Employees Retirement System (SERS) and the Public School Employees Retirement System (PSERS). The systems were supposed to be fed a steady diet of employer and employee contributions and investment earnings. But now, due to years of skimpy feeding and overly generous benefits, they have become insatiable zombies with massive appetites for taxpayer bacon. And the amount necessary to satisfy their hunger grows with each passing minute.
As of today, the two pension systems are starved for more than $50 billion. That’s a lot of bacon! To put this in perspective, the entire General Fund budget of the Commonwealth last year was about $28 billion. The funding gap reflects the difference between benefits promised and funds available to meet those promises. The pensions are now devouring our state budget, consuming funding for other important programs, including those intended to help the most vulnerable.
Intensifying the underfunding problem, these pensions—known as defined benefit plans– shift the investment risks associated with market fluctuations onto taxpayers instead of pension beneficiaries. If the stock or bond markets fall, it shrinks the amount of money available to pay current pensioners – and requires the government to make up the difference. In short, more taxpayer bacon for the zombie pensions, less for you.
And if you think your hard-earned bacon is safe — think again! Homeowners across the state are facing property tax hikes or cuts to vital services because of the spiraling pension obligations. More than one-third of Pennsylvania’s school districts have applied for exceptions to increase property taxes above state-imposed limits, because the retirement system for school employees is gobbling up more and more of the funding each district receives to educate kids.
Neither taxpayers nor public employees awoke the pension zombie. The zombie-inducing contagions were unleashed by economic downturns, lavish enhancements to retirement benefits and years of exceptionally poor decisions made by both Republican- and Democrat-controlled state government. In addition, school districts and the state failed to make adequate contributions to retirement funds when investment returns temporarily appeared to be exceeding expectations.
Over the past several decades, businesses have converted their traditional defined benefit retirement plans into more sustainable defined contribution plans, to keep pension zombies at bay. Private industry is not able to pass the unpredictable costs of defined benefit retirement plans to their customers, but the public system in Pennsylvania ultimately requires the state to pass its financial burden onto beleaguered taxpayers.
Fortunately, there are alternatives that can and must be considered. Sounding the alarm, Gov. Tom Corbett and several of my colleagues in the Legislature have advanced constructive solutions. These plans propose various approaches to accomplish the same goal: end the impending zombie-pension apocalypse and save your bacon!
A successful legislative remedy must stop the fiscal carnage and place current employees in a sustainable plan, while keeping the legal and moral promises made to retirees. This will prevent the hunger pangs of the $50 billion zombie from growing stronger. Our children’s education and the public safety of our communities depend on it.
In addition, we must stop the short-term accounting gimmicks and revisit unearned benefits to ensure the system is able to meet its obligations to past, current and future employees. This could include increasing employee contributions, increasing the retirement age and/or altering accrual rates. Without a permanent, disciplined fix to control the bacon-eating zombie, everyone’s future benefits are at risk of being consumed.
If the Commonwealth fails to change its current pension system, within four years taxpayers will be forced to nearly triple their bacon ration to $4.3 billion each year. The zombie pension systems are on an unsustainable and destructive path, and our vision for the future of Pennsylvania cannot be realized without short- and long-term solutions.
While bacon-eating pension zombies might sound like an amusing imaginary adversary, the threat posed by our insolvent public retirement systems is real. This crisis can no longer be delayed, deferred or delegated to the next legislative session, or the next generation. The General Assembly and the governor must enact a zombie antidote to protect our taxpayer bacon.
State Rep. Stephen Bloom represents the 199th Legislative District, covering Carlisle and western Cumberland County.
The views expresses are those of the author and not necessarily those of The Susquehanna Valley Center.
Nothing contained here should be considered as an attempt to aid or hinder the passage of any legislation.