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.”