Pennsylvania’s two public pension plans face a combined shortfall of $41 billion, and their costs will consume 62% of fiscal 2014 revenue growth, according to a report from the state budget office.
The Pennsylvania State Employees’ Retirement System, Harrisburg, has 65% of assets needed to cover projected liabilities, and the Pennsylvania Public School Employees’ Retirement System, also in Harrisburg, is 69% funded, the report said.
The school employees pension plan has $47.9 billion in assets; Pennsylvania State Employees has $25 billion.
In July, Moody’s Investors Service cut the state’s general obligation debt rating to Aa2, its third highest, citing rising pension obligations that will weigh on its economic recovery.
“Absent meaningful structural pension reform, the state’s general fund budget is on a very predictable path that will force a choice between either fully funding pension obligations or making cuts to the core functions of government,” Charles Zogby, Pennsylvania’s budget secretary, said in a statement.
State revenue is projected to rise about $818.7 million in fiscal 2014, according to the report. Pension cost increases, estimated at $511.2 million, will account for almost two-thirds of the additional revenue, the report shows.
Gov. Tom Corbett intends to propose a pension overhaul in his 2014 spending plan, for the year that begins in July, according to the report. Retirees and current employees with accrued benefits won’t be affected, it said.