Pension-news-5-06-lawmakers-retiring-pays

==Pa. lawmakers find retiring pays==
:Source: Mike Joseph, mjoseph -at- centredaily.com
When state Rep. Lynn Herman leaves office in December -- a 24-year career
halted after his fateful vote for the legislative pay raise -- he'll be
eligible for a pension estimated at more than $54,000 a year for the rest of
his life.
The pension, the product of one of the most generous legislator-retirement
programs in the 50 states, comes at an opportune moment for Herman.
Pennsylvania lawmakers must be at least 50 years old to start collecting
their pensions, and Herman turns 50 on Oct. 30.
The coming departure of Herman and at least 45 other veteran legislators --
including 30-year incumbent Senate Pro Tempore Robert Jubelirer, of Altoona,
and 24-year incumbent Senate Majority Leader David Brightbill, of Lebanon --
has focused attention on a retirement package lawmakers approved for
themselves and state employees five years ago that has now created a huge
liability for the state.
A recent study by Commonwealth Foundation senior fellow Richard Dreyfuss
found that in the next six years, taxpayers will be forced to pay a 615
percent increase in contributions -- from $584 million in fiscal year
2004-05 to almost $4.2 billion in fiscal year 2012-13 -- to the State
Employees Retirement System (SERS) and the Public School Employees
Retirement System (PSERS).
"It's a train wreck waiting to happen -- it's barreling down the tracks at
us," said Centre County Controller Chuck Witmer, who controls the county's
pension plan and is familiar with the state retirement systems.
"The state has created this huge obligation that nobody knows where the
money's going to come from," Witmer said. "They're not talking about
millions -- they're talking billions."
State House Speaker John Perzel, after a primary election in which voters
ousted pay-raise supporters Jubelirer and Brightbill, acknowledged the
approaching train.
On May 18, two days after the primary, Perzel tasked three House members to
study and recommend changes to the state pension and medical benefits system
so that, as his Web site quotes him, it "aligns with what Pennsylvania
taxpayers experience in the real world."
If the retirement plan that will give Herman an estimated $54,462 a year --
and free health insurance -- for the rest of his life is out of this world,
it got a boost in that direction with legislation in the spring of 2001. The
legislation, Act 9, came well after private corporations had begun to
abandon as too costly the very kind of program the lawmakers were about to
sweeten.
Act 9 passed the House 176-23 and the Senate 41-8. All five lawmakers with
Centre County constituents at the time -- Herman, state Reps. Kerry
Benninghoff, Camille "Bud" George and Mike Hanna, and state Sen. Jake Corman
-- voted for it.
The law, establishing a "class of service multiplier," gave a 25 percent
pension increase to more than 300,000 state workers and public school
employees but a 50 percent pension increase to legislators.
Political sentiments run parallel between the Act 9 votes in May 2001 and
the pay raise votes last summer. Of the 23 House members who opposed the
pension increase, 14 were still in office last July, and 11 of them opposed
the pay raise. Of the eight senators who opposed the pension increase, six
were still in office last July and all six opposed the pay raise.
State Rep. Beverly Mackereth, R-York County, who was elected to an open seat
in 2000, said she voted against the pension increase legislation because
"the whole thing was wrong" and "because it put us higher than all the other
state employees -- I didn't think that was right."
Herman's estimated pension got another boost from the "unvouchered expenses"
that allowed him to collect the July 7 pay raise immediately. The pension
formula uses the lawmaker's three highest annual salaries, and the
"unvouchered expenses" upped last year's salary figure to $72,319, the
highest of his legislative career.
Herman could not be reached for comment last week, despite repeated
attempts.
"If a legislator accepted unvouchered expenses, those payments are treated
as retirement-covered compensation," said SERS spokesman Robert Gentzel.
Herman's estimated annual pension is not the highest among departing state
lawmakers. State Rep. Elinor Taylor, R-Chester, who is retiring at age 84
after 30 years in the House, is eligible for yearly pension of about $97,000
a year, The Philadelphia Inquirer reported.
But the big-picture impact of the May 2001 legislation goes beyond the
higher pension increase lawmakers gave themselves, Dreyfuss said in an
interview.
The legislation came after the 1990s stock-market boom, when market
investments produced high returns and "there was a lot to go around,"
without anticipating that the market would go down precipitously after Sept.
11, 2001.
"They're not particularly healthy plans," Dreyfuss said, referring to SERS
and PSERS. "They're competitive with the way the private sector was in the
1980s. But the private sector got out of them because the costs were not
productive in today's volatile market. We're dealing with an outdated plan
design that is not affordable."
The Dreyfuss study says the SERS and PSERS members, including legislators,
judges, public school employees and other state employees, enjoy pension
provisions "more generous" than other state plans and "far more generous"
than major private employers in Pennsylvania.
"Retired legislators receive benefits more generous than that of most public
employees, giving them one of the best pension packages in one of the best
pension systems in the nation," writes Dreyfuss, an actuary and retired
director of employee benefits for Hershey Foods.
"The long-term commitments and liabilities made by policymakers on behalf of
taxpayers are unsustainable, particularly given the difficult economic
environment facing both the public and private sectors in Pennsylvania."
Although contract law prevents retirement benefits from being changed for
anyone but new hires, Dreyfuss recommends that policymakers "address the
question of whether elected officials should participate in any state
retiree health-care or state pension plan."
Voters in the nation's largest state took up this question 16 years ago.
In a 1990 referendum, Californians did away with the state's similarly
defined-formula pension for legislators, which had been established in 1947,
and left lawmakers eligible only for federal Social Security.
Californians apparently meant it. In another referendum in 2000, they upheld
the change, voting 5.9 million to 3.8 million -- 61 percent to 39 percent --
to defeat an attempt to resurrect the pension plan.
Mike Joseph can be reached at 235-3910.
http://www.centredaily.com/mld/centredaily/news/14685557.htm
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