Nov 26 Pennsylvania's $41 billion unfunded state
pension liability puts even core public services at the risk of
being cut, the state's top budget official said in a report on
The state's two public pension systems had $41 billion less
in assets in 2012 than they need to pay out future retirement
benefits, according to Pennsylvania Budget Secretary Charles
Without reforms, the state could be forced to cut funding
for public safety, health and human services, education, roads
and bridges, Zogby said.
"The areas at greatest risk of being cut are not 'nice to
have' government services and programs, but rather the core
constitutional responsibilities of state government," he said.
Most U.S. states have begun changing their public pension
systems after years of underfunding, plus poor returns on assets
during the recession, left them facing big gaps between benefits
they promised to workers in retirement and what they have on
hand to pay.
Pennsylvania Governor Tom Corbett said in July that he
intended to introduce pension reform measures to close the gap,
which had been estimated at $29 billion in 2010 by Pew Center on
the States. Corbett has not yet outlined what the measures would
Instead of raising taxes or cutting current retirees'
pension payments, Corbett should consider increasing employee
contributions, raising the retirement age and moving away from a
defined-benefit plan, the report recommended.
A public pension is generally considered healthy if it is at
least 80 percent funded.
In Pennsylvania, the pension fund for state employees is
65.3 percent funded, while the pension fund for public school
teachers and employees is 69.1 percent funded, the report found.
The funded ratios of the two systems are expected to decline
over the next several years, the report said, hitting a low of
55.2 percent and 59.4 percent before beginning to rebound.
Currently, once the state pays debt service, pensions and
federal entitlement obligations, there is not enough money left
to pay for all remaining programs and services.
For fiscal 2014, the state could have to cut as much as $500
million to balance its budget, the report warned. Pennsylvania
has a $27.7 billion budget in fiscal 2013.