The Pennsylvania State Senate passed a pensions reform bill Wednesday that intends to update the funding, sustainability and fiscal responsibility of the state’s two largest pension funds, said Jennifer Kocher, spokeswoman for the bill’s sponsor, Sen. Jake Corman.
The $27 billion Pennsylvania State Employees’ Retirement System and $51.7 billion Pennsylvania Public School Employees’ Retirement System, both based in Harrisburg, together have an unfunded liability of $60.12 billion.
Ms. Kocher said that the bill is expected to save taxpayers $18.2 billion over the next 30 years.
The bill proposes all new state and public school employees to be enrolled in a mandatory defined contribution plan, as well as in a cash balance plan.
For current participants, employee contributions for all future earnings will be increased by 3 percentage points to 9.25% for PennPSERS and 2.5 percentage points to 7.5% for PennSERS. Current employees will also be eligible to contribute up to 3% of payroll into an optional cash balance plan.
“The level of payment by the commonwealth and school districts required to annually address these amounts is staggering, particularly when other state revenues are reduced due to a struggling economy,” the bill said. “The current condition of Pennsylvania’s unfunded system combined with the state’s structural deficit (threatens) the financial well-being of current and future public employees.”
The bill added that, to fully fund the state’s pensions systems, contributions will continue to require a significant portion of state revenues. For example, without reform, pension expenditures are expected to exceed $4.8 billion in fiscal year 2016 and $7.3 billion by 2025.
The bill passed the Senate by a 28-19 vote. The next step is for members of the state’s House of Representatives to hold hearings on the bill sometime in June.
Jeff Sheridan, spokesman for Gov. Tom Wolf, did not return a phone call by press time.