PolicyBlog has moved!

Thank you for visiting, PolicyBlog has a new address.

Our new location is http://www.commonwealthfoundation.org/policyblog

Please adjust your bookmarks. Archived posts will remain here for now.


Thursday, July 16, 2009

Will Early Retirement Incentives Save PA Money, or Cost More?

Among the proposal of Pennsylvania Auditor General Jack Wagner to help balance the state budget without a tax increase. 

But Commonwealth Foundation Senior Fellow Rick Dreyfuss suggests this is likely to cost the state more money, rather than provide savings.  As evidence, he points to the experience of New Jersey:

Over the past 20 years, New Jersey has on at least four other occasions granted generous early retirement benefits, and in each case, experts say, the plans cost the state more than they saved. 

Last year, a review by The New York Times of New Jersey pension records and government and legislative reports relating to the state’s 2002 early retirement plan revealed a multitude of problems.

More than 5,500 workers — more than twice as many as the state had anticipated — received early retirement packages, which added thousands of dollars to many workers’ annual pensions. The larger number of retirements has meant higher-than-projected long-term costs to the pension and retiree health care systems.
In addition, many of those vacancies were filled immediately.

State Senator Leonard Lance, the leading Republican on the budget committee, said he was surprised that Mr. Corzine was considering the idea, since “in the past, he has said accurately that it’s counterproductive and it costs too much money.”


Anonymous said...

NB. Well, if you 'fill the positions almost immediately' as NJ did, then there is not much hope for savings. The idea is to eliminate positions through early retirement. If you do not eliminate the positions, you haven't done anything to save money. I assumed that was what the AG intended since his list includes a modest cost saving for that option.

Nathan Benefield said...

You are correct. The Auditor General's plan would be to not fill those positions or promote from with (at least in year one), and reduce the state payroll by 3 to 4%, per a conversation I had with him today.