Follow Corbett's cue: Lower pension rates
It has become an article of faith among unionized state employees, teachers and lawmakers, who profit from state and school district mismanagement of pensions, that their benefits may never be reduced.
But last week, Gov. Tom Corbett became the first major public official to state, publicly, the actual situation. That is, the state cannot reduce pension benefits already earned, but there is no reason that rates cannot be adjusted going forward.
The state government faces a $41 billion pension debt that is starting to consume the state budget. This year it will cost state taxpayers $1.6 billion. It gradually will climb to more than $4 billion a year and stay there for two decades.
In 2001, the state Legislature, looking at pension investment returns and concluding that the law of gravity had been repealed, unconscionably increased members' pensions by 50 percent. Then it raised state employees' benefits by an equally stunning 25 percent. That, of course, brought teachers to the table. They gave up their opposition to a back-door school voucher plan, the educational improvement tax credit, in exchange for their own 25 percent pension increase.
Lawmakers confidently announced that investment earnings alone would cover the massive increases, but the markets didn't listen. Soon afterward, they tanked when the "tech bubble" imploded. And they imploded even further in 2008 when reality pierced the "real estate bubble."
Over the entire period, lawmakers and most school districts did not adequately fund the pensions, creating the debt that now threatens to hamstring vital state-funded public services and public education.
That debt must be covered regardless of whether the state government returns future pension benefits from the stratosphere to earth. Yet the only pension reform pondered by lawmakers, going forward, has been enrollment of new state employees in a defined contribution plan, such as a 401(k), rather than the current defined benefit plan that passes on all risk to taxpayers.
But when trying to escape a hole, as the saying goes, the first rule is to stop digging. Lawmakers should take the governor's cue on future benefits, restoring rates to what they were before lawmakers irresponsibly expanded them. Doing so won't resolve the immediate debt problem, but it will help to stabilize the system for the long term - for taxpayers and beneficiaries.