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No Easy Answers to Public Pension Woes

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Regardless of any additional reforms, executives from the state’s two big public pension funds are telling state lawmakers that adequate employer contributions are essential.  In this case, the state is the employer and its taxpayers are the ones footing the bill. 

As it stands, the combined unfunded liabilities of the State Employees’ Retirement System (SERS) and Public School Employees Retirement System (PSERS) are north of $40-billion dollars and climbing.  The reasons are many: the 2008 market crash, a lost decade in which the state opted to defer its pension contributions, and a 2001 law that padded pension benefits – especially for lawmakers themselves. 

Governor Tom Corbett is proposing a series of long-term pension reforms in hopes of reducing the short-term burden on the state, and PSERS executive director Jeffrey Clay was peppered with questions during House and Senate budget hearings on Wednesday. 

“If you’re basically asking the question, “can we get to solvency under Act 120?” the answer would be – from the pension system perspective – yes.  The question is whether the state and the school districts can actually afford that,” Clay explains. 

Act 120 of 2010 helped to smooth out the pension spike by reducing the benefits of future state employees and teachers, increasing the retirement age and extending the vesting period.  Even with those reforms being imposed for all new hires, the state’s $1.5-billion dollar pension obligation this year is expected to climb to $4.3-billion by FY2016/17. 

State Sen. Jake Corman

State Sen. Jake Corman

“The policy question for all of us sitting here is, “what are we willing to pay every year?”” said Senate Appropriations Chairman Jake Corman.  As lawmakers are finding out, that’s a question without an easy answer. 

When addressing the issue of switching new hires to a 401(k)-style ‘defined contribution’ plan, the funds’ executives say any system will work as long as it is well-structured and well-funded. 

But critics say that sort of switchover ignores the diminished rate of return for the defined-benefit plans that would still be paying out benefits for decades to come.  “Policymakers should ask the Corbett administration how much will be lost in investment earnings with pension restructuring and how much taxpayers will be on the hook when that happens,” says Keystone Research Center executive director Stephen Herzenberg. 

The Corbett administration is banking on $175-million dollars in savings for the state, next year alone, through pension reforms.  They say PA’s 500 school districts would be able to save another $138-million.

PA Budget Debate

Sequestration Cuts to be Triggered on Friday

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Congress still has a few days to act, but compromise on a federal deficit-reduction plan appears to be less likely by the hour.  Radio PA’s Matt Paul caught up with US Senator Bob Casey (D-PA), Tuesday, to discuss the so-called sequester:SEQUESTER

US Senator Bob Casey

US Senator Bob Casey

Casey’s reference to 78,000 lost jobs in the Keystone State is based on a 2012 study from George Mason University.  The other consequences Casey alludes to are largely based on data released by the White House this week. 

Senate Democrats’ revenue-raising plans would target the wealthy, but Republicans in Congress believe the savings must be accomplished through spending reductions.  Last session, the GOP-controlled House passed two measures, which Speaker John Boehner called “smarter cuts.”

Liquor Board’s Balancing Act on Display at Budget Hearing

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As the battle lines are being drawn on Governor Tom Corbett’s liquor privatization plan, the legislative debate may come down to privatization vs. modernization.  But the issues can be mutually exclusive.  Peppered by repeated questions from the Senate Appropriations Committee, Liquor Control Board Chairman Joseph Brion said he is not personally opposed to privatization.  “I don’t think the state should be in the liquor business.  But – by the same token – we are in the liquor business.  So my attitude is – if we’re going to have a liquor business – make it the most profitable and best that you possibly can.” 

Others have suggested that modernizing the system now, will make it more valuable for possible privatization in the future. 

The Liquor Control Board transferred $530-million dollars to the state’s General Fund in the current fiscal year, but Monday’s testimony in the Senate hearing room indicated that more than 80% of the cash was generated by taxes, which would still be in place under a privatized system. 

Not lost on lawmakers weighing these difficult issues is the cost of enforcing the state’s liquor laws.  “Clearly if you’re going to have more licensees, you’re going to need more feet on the ground, and that’s okay, but we have to take that into contemplation when we review the legislation,” says state Rep. Scott Petri (R-Buck), a member of both the House Appropriations and Liquor Control committees.   

State Police Commissioner Frank Noonan, last week, estimated that his agency would need an additional $5-million dollars under a privatized liquor system.  Liquor Control Board officials have indicated that they’re regulatory costs total $38-million dollars today, but those are currently covered by the revenue they generate. 

Forthcoming legislation would appropriate $5-million more dollars for PSP’s Bureau of Liquor Enforcement and hike fines for liquor law violations.  House Majority Leader Mike Turzai’s latest bill is set to be introduced on March 4th.

Sequestration Cuts Loom Friday in Washington…and in PA

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Little, if any, progress is being reported out of the talks to head off those automatic spending cuts known as “sequestration.” Without a deal between Congress and President Obama, the cuts kick in on Friday.

The latest salvo in the war for public opinion and support comes from The White House, as the administration released a state-by-state report on the impacts of sequestration. Among the expected casualties for Pennsylvania:

  • $26.4 million in funding for primary and secondary education
  • $21.4 million in funding for education of students with disabilities
  • 26,000 civilian military job furloughs
  • Elimination of Head Start services for about 2,300 children
  • $5.7 million in environmental funding
  • Additional cuts in funding for public health, child care, job search assistance, law enforcement and more

 

 

Lawmaker Wants Vehicle Buyers Notified of Data Recorders

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You’ve heard of the “black boxes” in planes and trains that investigators retrieve after crashes to learn more about what happened.  But did you know you may have a similar device in your car?

Motor vehicle event data recorders collect information about speed, seat belt use and brake application according to state Representative Ted Harhai (D-Westmoreland/Fayette).  He says many vehicles already have them installed, but owners are not aware of them.

Representative Harhai wants to make sure that consumers are notified if their vehicle is equipped with the device.  He adds that information retrieved should not be the sole evidence used in determining fault in an accident.

Representative Harhai says the person who purchases the vehicle does not have access to data recorded in the black box and he thinks that’s unfair.  He wants to create a level playing field.  He says there have been cases in the past where insurance companies or law enforcement obtained data through court orders, but the vehicle owner did not have access to it.

Representative Harhai thinks there should be something with the vehicle owner’s manual that tells the buyer about the data recorder.  He has been working on the issue since 2005.

Radio PA Roundtable 02.22.13

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On this week’s Radio PA Roundtable, Brad Christman and Matt Paul bring you the latest from state legislative budget hearings, which included questioning on topics ranging from state pensions to guns. And, as budget season kicks into high gear, what’s the latest on the pension crisis?

Radio PA Roundtable is a 30-minute program featuring in-depth reporting on the top news stories of the week.

Click the audio player below to hear the full broadcast:

[audio:https://s3.amazonaws.com/witfaudio/radiopa/Roundtable02-22-13.mp3]

Should Family Businesses Pay the “Death Tax”?

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Family farms are now exempt from the Pennsylvania inheritance tax under a new state law enacted last year.  Now there appears to be bipartisan support for doing the same thing for family businesses.  “When we tax these assets in a small business… at the death of one of the principle owners, oftentimes what happens… is critical business assets have to be liquidated in order to pay the tax bill,” explains state Rep. Stephen Bloom (R-Cumberland), the prime sponsor of a bill to eliminate the so-called death tax on mom & pop shops. 

Bloom’s bill has already advanced out of the House Finance Committee with a vote of 20 – 4, and has since been re-referred to the Appropriations Committee. 

While the bill would nix close to $10-million dollars in state revenue, Bloom believes the economic activity it would create can more than make up for the cost.  “We want to reward our folks who’ve been frugal and generated assets and are growing jobs in this state we don’t want to punish them.”    

Opponents have several complaints in addition to the lack of offsetting revenue.  The Pennsylvania Budget & Policy Center believes the bill would create a new set of inequities and loopholes, thereby shifting more of the state’s tax burden onto middle-class families. 

The House has recessed for three weeks of budget hearings.  Session is scheduled to resume on March 11th.

Lottery Debate Dominates Several Budget Hearings

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As Governor Tom Corbett mulls his next steps, Revenue Secretary Dan Meuser spent the bulk of his House budget hearing defending the recently-rejected Lottery contract.  Meuser remarked that the premise for much of the opposition is wrong.  “There’s no plan to sell the Lottery.  We cannot by federal or state law.  There is no plan to relinquish control of the Lottery.  We maintain full control of the Lottery,” he emphasized.

At issue is the private management agreement the Corbett administration negotiated with Camelot Global Services, in which the private company has guaranteed record profits over the next 20-years.  The administration has been working on this for nearly a year, because the demand for senior services is growing at a pace that’s too rapid for the Lottery Fund to sustain. 

On Valentine’s Day Attorney General Kathleen Kane called that contract illegal and unconstitutional, and she rehashed that decision in front of the Senate Appropriations Committee on Wednesday.  Kane’s main points were: 1) the contract infringed on the legislature’s authority, and 2) KENO is not an authorized game under the Lottery Act. 

“I am not an economist and I don’t pretend to be, I am a lawyer, and we went through the statutory construction of the Gaming Act, the Lottery Act, as well as the General Assembly’s authority,” Kane said as she told the panel this was not a policy decision. 

Revenue Secretary Dan Meuser

Revenue Secretary Dan Meuser

But Secretary Meuser disagreed with both of Kane’s major points at his House hearing one day earlier.  “The law clearly states – laws granted by the legislature – granting the Department of Revenue the ability to hire vendors for the effective and efficient growth of the Lottery, and to promulgate new games. 

Meuser also contends that KENO – which was rolled out in nearby Ohio a few years ago – falls within the scope of the Lottery’s terminal-based game regulation, not the “slot machine” definition of the Gaming Act.  He says KENO would us the same algorithm as some exiting Lottery games. 

In lieu of a protracted legal debate, some Democratic lawmakers are calling on Governor Corbett to work with the General Assembly to maximize Lottery revenues in-house.  Also, one Republican lawmaker plans legislation to authorize KENO while barring online, interactive Lottery games.

Budget Hearings Kickoff with Medicaid Debate

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The Governor’s Office and Senate Democrats aren’t on the same page when it comes to expanding Medicaid under the federal Affordable Care Act.  Based on the exchanges that played out on the opening day of state budget hearings, they may not even be reading from the same book. 

When pressed for answers as to why the administration isn’t planning to expand the Medicaid program, Budget Secretary Charles Zogby told the Senate Appropriations Committee that it would cost the state an extra $200-million dollars next year and more than $4-billion dollars within the next decade. 

“I don’t know where that money comes from,” Zogby said while noting that not enough attention is being paid to the cost side of the Medicaid equation. 

Senate Minority Appropriations Chair Vincent Hughes (D-Philadelphia) noted a “huge gulf” between the analysis of the administration and the analysis of legislative Democrats. “Our analysis indicates that the implementation of Obamacare saves $200-million because the feds are now paying for state dollars on the General Assistance population, saves about $140-million in state payments for county health services, and saves about $100-million in uncompensated care costs.” 

Hughes pressed Budget Secretary Zogby for a public vetting of the numbers the administration has been crunching.

State Senator Larry Farnese (D-Philadelphia) later found irony in Zogby’s complaints about how unresponsive the Obama administration has been to the governor’s Medicaid questions, while the Corbett administration has not responded to Senate Democrats’ request to see their fiscal analysis.

The House and Senate Appropriations committees will continue to hold budget hearings through March 7th.

Institute Offers Awards for Work to Promote Love and Forgiveness

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The Fetzer Institute was founded to promote the power of love and forgiveness   More than 200 non-governmental organizations worldwide have entered the institute’s competition for two 25 thousand dollar grants to continue their work on projects that do just that.  One grant will be awarded to an organization in the United States and the other will go to an international organization.

There’s  a  smaller award of five thousand dollars which will be given at the same time. The Institute wants people to vote on which of the entries touched them most. Stories of all of the applicants can be found at www.tellusworld.org.  The awards will be announced on February 28th.

Thomas Harvey of Notre Dame University’s Mendoza School of Business is an adviser to the institute. He says the entrants do a wide variety of work to further love and forgiveness, including educational experiences, development and outreach across cultures.

There are at least five entrants with ties to the Pittsburgh area; A Mother’s Wish, Southwinds, Haitian Families First, Hekima Place and South Side Anglican Church.

Hekima Place is in Kenya but was founded by a Pittsburgh native and has U.S. contacts in Pittsburgh.

A Mother’s Wish  serves poor communities in the Dominican Republic and is based in Arizona. But it was founded by a woman whose daughter underwent a life-saving liver transplant at Children’s Hospital of Pittsburgh.

Haitian Families First provides support to needy families in Haiti and was founded by two Pittsburgh sisters.

Southwinds provides residential care for with developmentally disabled adults in southwestern Pennsylvania.

South Side Anglican Church does outreach in a part of Pittsburgh known for late night reveling and violence.