Will this be the year?01/03/2017 12:04PM ● By Steven Hoffman
Will this be the year that the State Legislature finally addresses the pension crisis that has been hanging over Pennsylvania like a mammoth, dark cloud for more than a decade?
New freshman lawmakers, including State Rep. Eric Roe from the 158th District here in Chester County, will be sworn into office this week, and with the start of a new year comes new hope that the State Legislature will finally take steps to address Pennsylvania's pension crisis.
School districts will soon be entering a new phase of developing their budgets for the 2017-2018 school year, and no one should be surprised if tax increases are in the offing.
Year-to-year increases in the state-mandated contribution rates have been ripping holes in school district budgets for nearly a decade now.
School district officials learned in December that the contribution rates were increasing even more than expected for the 2017-2018 school year because of lower-than-anticipated returns on investments for the state's pension funds.
The current pension crisis can be traced back to a bad decision when Tom Ridge was in the governor's office and the State Legislature voted to boost their own pensions, as well as the pensions of public school and state employees. They banked on future investment returns to pay for the increased costs.
But then the stock market tumbled in 2001, and again in 2003. By the time the economic recession took hold in 2007 and 2008, the pension funds were already being under-funded by billions of dollars each year as the state government opted to not set aside enough money each year to pay the pensions.
In 2010, lawmakers did take a small step to address the pension crisis, increasing what employees pay into the system and increasing the retirement age to 65.
But no long-term solutions for the crisis have been coming from Harrisburg.
There has been lots of talk, and a few actual attempts to address the issue. The State Senate, for example, introduced a bill to shift new state and school employees into a 401(k)-type plan with a defined contribution. But Republicans and Democrats haven't been able to agree on a plan.
Pension costs are taking up a larger and large percentage of school district budgets at the local level, and the state's budget at the state level.
The pension crisis grows every year that it's not addressed, and without reform the rapidly escalating pension costs will continue to plague school districts—and the taxpayers who shoulder the burden of funding them.
The state needs short-term relief and a long-term solution that will provide stability and reduce the burden on school districts and taxpayers. Will this be the year that the state's pension crisis finally gets a solution, or will we be in the same position when the calendar flips to 2018?