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Pension Reform Plan Becomes Legislation

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Bills that are about to be introduced in the House and Senate will reflect the comprehensive pension reform plan that Governor Tom Corbett outlined back in February.  “Should we be successful, this will be the most comprehensive pension reform package in the United States of America,” explains Senator Mike Brubaker (R-Lancaster), who will sponsor the Senate bill.  As Chairman of the Senate Finance Committee, Brubaker also vows to schedule a public hearing on the issue. 

Without pension reform, supporters say the only other options are deep budget cuts or sharp tax increases.  “We have to convince both sides of the aisle in the legislature that this isn’t a partisan issue, this is a future of Pennsylvania issue,” Governor Tom Corbett said while flanked by supporters at a lunchtime news conference in the capitol building. 

Pointing to the current $47-billion dollar unfunded liability across the state’s two big public pension plans, Corbett says each Pennsylvania household would have to write a check for $9,500 just to cover that cost.  He adds that without reform the state’s pension obligations will consume more than 60-cents of every new revenue dollar in the years ahead.  The state’s pension obligation is growing from $1.1-billion dollars last year, to $4.3-billion by 2016. 

So what would the Corbett plan do?  Starting in 2015, new hires would be enrolled in a 401(k)-style defined contribution retirement plan, instead of the traditional defined benefit pension system that exists today.  Current employees would remain in the defined benefit plan, but their future benefits would be reduced to help save the state $12-billion dollars over the next 30-years. 

Doing this, the Corbett administration says, will allow the state to save $175-million dollars in the coming fiscal year.  PA’s 500-school districts are scheduled to share in nearly $140-million in savings. 

But opponents say there are hidden costs that outweigh the potential savings.  “You would speed up the process at which all of the dollars that are currently there would be paid out,” state Treasurer Rob McCord says of the move to phase out the existing pension plans, “and the professional investment managers would have to move it all towards fixed income, highly liquid assets that have very low returns.”

The public sector unions continue to lead the opposition, pointing to a 2010 pension reform law they say is just now starting to yield results.  “We have more folks going into it, money going into the system for the unfunded liability, and our returns are doing better,” AFSCME Council 13 executive director David Fillman said on an afternoon conference call with reporters.  He’s referring to Act 120 of 2010, which reduced new hires’ benefits while requiring them to pay more into the system.  Fillman says 11,000 workers have been hires since the law took effect. 

Even if state lawmakers get past the wrangling over the dollars and cents of comprehensive public pension reform, the question of constitutionality will undoubtedly wind up before the state Supreme Court.  And that may be what’s giving Harrisburg the most pause with just eight weeks to go before the new fiscal year.

“Ask the Governor” Comments Spark Firestorm

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While discussing the state’s 7.9% unemployment rate on Radio PA’s “Ask the Governor” program, Governor Tom Corbett expressed concern that many employers can’t find qualified employees who can pass a drug test.  The comments went viral in a matter of hours, with the Pennsylvania Democratic Party asserting that it’s just the latest example of Corbett blaming Pennsylvanians for the state of the economy. 

Out-of-touch and insulting were just two of the words Pennsylvania Treasurer Rob McCord used to describe the comments in a statement released on Tuesday.  “I talk with hundreds of business owners and business leaders every year and this has not been brought up to me,” McCord later told Radio PA of the drug test issue.  “So I’m not sure that that’s a real issue, and it sounds like it’s a blame-the-victim distraction game.” 

But Labor & Industry Secretary Julia Hearthway says employers across the state are sharing drug test concerns with her too.  “It’s very difficult to quantify, but it’s certainly an issue that identifies one employment barrier that exists out there,” she explains. 

For safety and insurance reasons zero-tolerance drug policies are often imposed in various industries, including manufacturing.  “This issue is very real.  The governor is absolutely right, and if anything I hope that this is a teachable moment for the public,” says Pennsylvania Manufacturers’ Association executive director David N. Taylor, “because I don’t think a lot of people – especially younger people – realize that by being recreational drug users they, in many instances, are rendering themselves unemployable.”

Taylor says there are 6,000 – 7,000 good manufacturing jobs for which employers can’t find qualified employees.  While there are numerous factors driving that figure, he contends that failure to pass a drug test is absolutely one of them.

Reactions to Lottery Decision Pouring in

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The contract to privatize Pennsylvania Lottery Management has failed Attorney General Kathleen Kane’s “form and legality” test.  Reactions abound from stakeholders and elected officials, and their statements are providing a few hints as to what’s next.  Check them out for yourself:

Governor Tom Corbett:

“I’m deeply disappointed. I don’t agree with the attorney general’s analysis and decision, and we will review our legal options.

My job is to protect Pennsylvania’s seniors, and we will continue to do that.

We have a growing population where one in four Pennsylvanians will be over the age of 65 by 2017. My goal is to ensure that funding for senior programs keeps pace with that growth.”

(note that in his public comments in Pittsburgh, Governor Corbett said that one in four Pennsylvanians will be over the age of 60 in the next 17-years)

Camelot Global Services:

“We are disappointed with Attorney General Kane’s decision to reject the private management contract. We guarantee our proposal will produce unprecedented profits for senior programs and we have backed our investment in Pennsylvania with $200 million – transferring all risk from state taxpayers. Camelot has indicated it would headquarter in Pennsylvania, pay all taxes required of any commonwealth business, and keep all lottery jobs in the state. We have also publicly stated we would not oppose union organization by our employees. We have no further comment at this time.”

Speaker of the House Sam Smith / House Republican Leader Mike Turzai:  

“The administration’s interest was always about growing Lottery proceeds to increase funding for programs, thus helping the state serve its expanding senior population. We also realize many may feel this action by the attorney general ‘saves the Lottery.’ However, given that the Lottery has contracted out significant portions of its current operations, and has done so for many years, we hope the attorney general’s decision does not set the current operations back.   

“The legislature passed the lottery law in 1991, giving broad powers to the Secretary of Revenue to manage the operations. Right or wrong, it’s the legislative branch of government that should decide if the governor has too much say.  Consequently, we expect that the legislature will be reviewing the attorney general’s determination with great interest.”

House Democratic Leader Frank Dermody:

“The effort to outsource management of the Pennsylvania Lottery to a foreign corporation was done largely out of public view and it was wrong. In confirming the legislature’s authority in this matter, the attorney general made the right decision and followed the law.

“Because of her decision, lottery proceeds will continue to benefit older Pennsylvanians rather than being sliced up to benefit corporate shareholders.

“The governor is wrong when he claims the rejection of this improper contract will cost seniors money. I will push during the upcoming budget process to provide even more money than the governor proposed for senior programs and it can be done with the lottery’s current revenue.”

Treasurer Rob McCord:

“I commend the Attorney General for her independent review and subsequent rejection of the administration’s attempt to expand gambling through the state contracting process.

“The administration was repeatedly warned, as early as last year, that the proposed contract would permit new forms of gambling not currently authorized by the Legislature and not regulated by the Gaming Control Board

“Expanding the Lottery is a policy decision that should include the General Assembly, not be done through a closed-door contracting process.  Beyond the legal issues, this proposal also raised serious questions about how best to serve seniors efficiently with the programs that the Lottery pays for.”

Auditor General Eugene DePasquale:

“While I have not opposed all privatization, in the case of the Pennsylvania Lottery, Attorney General Kane and her team of lawyers made the right decision after identifying the legal flaws in the contract that would have led to an unprecedented expansion of gambling without legislative and public input.

“I am concerned that the benefits from the private management agreement would not meet or exceed what the current, very well run Lottery could produce in the same time frame. That concern, and the decision to expand gaming, need to be addressed with input from the public and Pennsylvania General Assembly before we go any further.

“I suspect today’s decision will not be the end of this story, but I hope Gov. Corbett will carefully weigh the cost to taxpayers before he decides to pursue this matter further. My office will continue to monitor the situation and be prepared to conduct and fair and independent audit should the contract eventually be implemented.”

 

RadioPA Roundtable

Radio PA Roundtable 11.02.12

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On this week’s Radio PA Roundtable, Brad Christman and Matt Paul sum up the impact of “Superstorm” Sandy and bring you details on the indictment of former Penn State University President Graham Spanier. Matt will also bring you an interview with incumbent state Treasurer Rob McCord after last week profiling his Republican challenger.

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/Roundtable11-02-12.mp3]
Pennsylvania Finance Building

Bills Could Benefit PA’s College Savings Plans

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After receiving unanimous votes in the House Appropriations Committee the pair of bills awaits action on the Senate floor.  One would ensure that state tax benefits are only applied to state-sponsored college savings plans.  “Pennsylvania is one of just a few states that allows for tax credits for investments out of state,” says Senator Jake Corman (R-Centre), the prime sponsor. 

State Treasurer Rob McCord (D-PA) applauds the bipartisan effort.  “It will help current account holders by lowering fees.  It will help future account holders by making it crystal clear that they’ve got a best of breed program, top-ranked, Vanguard-provided, right here in Pennsylvania,” McCord explained in a telephone interview.    

Corman’s second bill would put the full faith and credit of the Commonwealth behind the state’s Guaranteed Savings Plan.  “I don’t think anyone here believes that if this program came under financial distress that we wouldn’t step in,” he said at this week’s Appropriations Committee meeting. 

Treasurer McCord supports this bill too, telling us the explicit guarantee would assure even the most cautious consumers and advisors.  But he adds that the GSP is extremely healthy.  “We’ve had record-breaking investment return rates under the McCord Treasury, I’m singularly proud of that.” 

Both bills (SB 1135 & SB 1090) could soon be called up for final Senate votes.  The timing seems right, as May 29th is “529 College Savings Day.”

PA Treasurer Analyzes Gaming Markets

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Ten casinos are already operating in the Keystone State.  Two resort casinos are pending, and two casino licenses are currently unallocated.  One of those remaining two licenses was originally awarded to Foxwoods project in Philadelphia, and eventually revoked by the Gaming Control Board.  The other is earmarked for a yet-to-be-built racetrack in Lawrence County. 

Both licenses are subject to possible legislative intervention and relocation, and a key Senate committee got the first look at Treasurer Rob McCord’s analysis of alternative locations at a hearing this week.  “When you take a look at eastern Pennsylvania, supply and demand seem to be meeting each other… when you move to western Pennsylvania you move from maturation to potential saturation,” explained McCord, who by way of his office is a non-voting member of the Gaming Board and legal custodian of gaming funds.

McCord commissioned a study with the Innovation Group, and found that the numbers drive regulators and policymakers to look at central Pennsylvania.  Ranking alternative casino locations based on the net gain to PA gaming revenues, South York tops the list with a $154-million dollar impact.  “This is a net revenue number.  So you might see in Philadelphia the highest gross number but then you have to ask yourself, how much of that is cannibalization of Pennsylvania facilities?   You really don’t care if you’re cannibalizing out-of-state facilities,” McCord says.  Reading, PA came in at number two among the ranked alternatives. 

Rob McCord Gaming Presentation

McCord's presentation focused on the net gain for Pennsylvanians.

State Senator Jane Earll (R-Erie) who chairs the Senate Community, Economic and Recreational Development Committee recognizes there is some legislative interest in moving either of the aforementioned licenses.  “I think to have concrete information about what the potential impacts on our incumbent investments might be is helpful,” Earll said after the hearing.  McCord made no recommendations, rather calling the study a tool for analysis. 

The study also found that a potential casino in Youngstown, Ohio would have a significant impact on future profits from the would-be Valley View casino in Lawrence County.  The Ohio project would have a near 33% impact, dropping net revenues from $122-million to $83-million under that scenario.

Cash

New Terms of Service for UC Debit Cards

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A new company is administering Pennsylvania’s unemployment insurance debit cards, and new terms of service are in place.  According to Department of Labor & Industry spokesman Sean Yeakle, the new agreement offers more free withdrawals and more ATM locations.  “More than 430,000 Pennsylvanians receive unemployment compensation through a debit card, and under the terms of service governing this new program we estimate they’re going to safe about $3.5-million dollars in fees.” 

“That’s money that will go back into the economy and serve struggling Pennsylvanians and their families,” Treasurer Rob McCord said in a statement.  The Department of Labor & Industry and Treasury Department had been working together to reduce fees – many of which are uncommon to traditional debit card users – under the new agreement with ACS. 

Under the new service terms, Wells-Fargo ATMs will now be considered out-of network.  PNC Bank and MoneyPass ATMs will be considered in-network.  Gone is the “denial fee,” which had been applied if an attempted withdrawal exceeded available funds.  However, out-of-network ATM transactions will see fees increase from $1.50 to $1.75.  Impacted Pennsylvanians can learn more online.    

Pennsylvania’s unemployment compensation system started going “paperless” in 2007.  Today, all payments are made electronically.  “That’s definitely saving Pennsylvania taxpayers money in terms of the millions of dollars associated with printing and mailing the checks, and it’s also reduces the opportunity for fraud,” Yeakle says.