State Faces $41 Billion in Pension Unfunded Liability, Increasing Pension Contributions
HARRISBURG, Pa., Nov. 26, 2012 /PRNewswire-USNewswire/ -- Gov. Tom Corbett's Budget Office released the Keystone Pension Report today, providing a comprehensive overview of Pennsylvania's public pensions and demonstrating the impact pension contributions and unfunded liabilities have on the state's budget.
The report outlines the current pension situation facing Pennsylvania, identifies factors that have contributed to Pennsylvania's pension crisis, and offers a framework for considering structural redesign and reform of the pension system to ensure long-term stability of the plans.
"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," Budget Secretary Charles B. Zogby said. "With a clear understanding of the crisis and the challenges we confront, it is imperative that Pennsylvania find a workable solution."Contributing factors to today's pension crisis include previously instituted expansions to retiree and member benefits, nearly a decade of state and school district underfunding of contributions, and less-than-expected investment returns. As a result, both the State Employees Retirement System (SERS) and the Pennsylvania School Employees Retirement System (PSERS) pension programs are less than 68 percent funded. A healthy pension funding ratio is about 80 percent funded. In addition to the unfunded status of the pension systems, the report describes the growing nature of required employer contributions needed to fund the current cost of the pension benefits, as well as addresses the unfunded liability. Contributions are expected to rise significantly in the coming decade, reducing the state's ability to pay for mandated programs and services like medical assistance, public education, public safety, roads and bridges.