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Friday, June 06, 2008

Rendell administation to address pension crisis

Budget Secretary Michael Masch (a parting shot before he leaves state government at the end of the month?) unveiled a proposal to reduce the pension shock in FY 2012-13. The full report is here.

The plan basically calls for flattening out the spike (see image) by increasing employer (i.e. taxpayer) contributions now, rather than later.

We are glad the Governor is finally listening to us, first on leasing the Turnpike, now on addressing pension reform, which we have have been saying for some time. The Governor's office also opposes a COLA for retirees, which would require higher tax increases (estimated by the report at over $500 million per year for 20 years), until the pension crisis is fixed.

On the negative side, the Governor showed no support for defined-contribution plans, which are absolutely needed to provide a long term fix. Defined contribution plans, like 401(k)s are predictable (there are no spikes), affordable, and not subject to political manipulation - like COLAs or the 2001 pension grab for legislators.

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