Thursday, February 14, 2013
The state pension 'calf' is costing us
My latest rant is getting a lot of response so I thought I'd post it here, too. Enjoy! A man was driving down the road out in Lancaster County when he hit and killed a calf that had walked right out in front of his car. Devastated, the man pulled over to the side of the road and realized the calf had wandered off from a nearby farm, so he trekked up the long driveway and knocked on the door. When the farmer came to the door the man told him what had happened and offered to pay for the calf. “How much was the calf worth?” the man asked. “Oh, I’d say about $200,” the farmer said. “But, in about six years he’d be worth about $800. So $800 is what I’m out, I’d say.” Feeling like he was being taken advantage of just a bit, the man reluctantly wrote out a check for $800. He handed it to the farmer and said, “Here you go, a check for $800. You can cash it in six years.” Now that’s probably not a true story, but when I heard that joke I couldn’t help but think of our state budget and what we could have done six years ago to keep from writing the massive checks we’re writing today to get us out of multiple jams. Most notably is the state pension jam. I wrote about this a couple of weeks ago after a visit to the governor’s mansion where a group of local editors were presented with what seemed eerily similar to a doomsday scenario by budget secretary Charles Zogby, who presented a chart filled with red numbers. For you non-accountant types out there, red numbers are not good. Every year since 2004 the state has been swimming deeper and deeper in red numbers related to the state’s two pension plans. And while I will quickly point out that our state budget should be a non-partisan issue, those red numbers just keep spiraling out of control while a Democrat sat in the governor’s seat. Now a Republican is doing something about it, and of course, the rancor is just getting underway. Gov. Corbett presented his budget last week before a joint session of the General Assembly. Thankfully, the $28.4 billion spending plan doesn’t include a raise in taxes. And it does so while funneling more money into education, health and welfare services as well as transportation. It has to be tough to be a Democrat and see these reforms taking place, especially when all of these problems were lingering throughout the Rendell administration. And please, please don’t come back at me with Corbett is just making up for the cuts he made to education two years ago. Corbett didn’t cut education spending when he came into office. He was simply presenting a budget that didn’t include Obama’s stimulus money, which everyone knew was going to go away. Now, the irony of this increase in education spending is that it is tied to reforms in the pension system. Corbett is calling for $90 million extra for education, including $6 million for Pre-K and Head Start programs. However, that’s not going to happen if current employees are not moved over to a 401K type of retirement plan. It needs to be made clear, though, that this can all be done without cutting any pension benefits already earned by teachers and administrators. In fact, the change in the way the state funds retirement benefits for school district employees will provide an additional $140 million in pension savings across the commonwealth. The pension debacle has been called a crisis, which it certainly has evolved into during the past decade, now sitting in a $41 billion hole. It’s been referred to by the governor as a tapeworm. Fixing it is equivalent to “building a plane while flying it,” Zogby said during our editorial meeting with the governor. The pension calf was worth a few hundred million about 10 years ago. It’s now worth $41 billion. If nothing is done, it could be worth $80 billion in six years. I don’t think anyone wants to write that check.