HARRISBURG, Pa. — Pennsylvania lawmakers approved legislation Thursday that will cut retirement benefits for future hires in public schools and state government as part of a package of changes designed to slash risk and reap modest long-term savings from the state’s deeply indebted public-sector pension systems.
The state House voted 143-53 to send the landmark pension overhaul bill to Democratic Gov. Tom Wolf, who plans to sign it Monday.
The cost of the two multibillion-dollar public pension systems has become a significant drag on state government finances and is widely blamed for driving up property taxes that largely fund public education in Pennsylvania.
The legislation won’t help much with those costs for many years, if at all, critics said. Debt in the two plans is currently estimated at more than $60 billion and growing, a debt that is tied to the benefits of current employees and retirees.
During floor debate, Rep. John McGinnis, R-Blair, urged his colleagues to directly attack the pension debt, characterizing the bill’s changes as “synonymous with a phenomenon called kicking the can down the road.”
“Our approach today in dealing with a massive debt problem is to let it ride and let it get more massive,” said McGinnis, one of just four Republicans to vote against the bill. “We’re not making history, we are repeating it.”
Supporters called pension costs Pennsylvania’s biggest financial problem and argued that the bill would lower the burden on taxpayers when stock market downturns trigger the need for more money to keep the plans solvent.
“People talk about a risk shift — this is a risk shift,” said Rep. Warren Kampf, R-Chester. “What is the risk? The risk is that the thing that is happening to us and all the people of Pennsylvania right now will happen in the future.”
Wolf and legislative leaders worked on the proposal for months behind closed doors, following four years of attempts by Senate Republicans to end or reduce the traditional pension benefit for future public employees.
The systems’ precarious financial position is largely the result of decisions the General Assembly and governors made more than a decade ago to boost benefits, including retroactively, and to let the state and school districts go years without paying their share.
The bill would not diminish benefits for current employees and retirees. The new plans would start to take effect for those hired in 2019, including judges or lawmakers who start their service after that date.
For the first time, new hires would have to choose from among plans that include a 401(k)-style benefit. The traditional pension benefit would shrink by more than one-third. Current employees can choose to join the new plans.
The retirement age would rise from 65 to 67 and pension benefits would be tied to five years of salary, instead of three years, to smooth out spikes driven by overtime or other salary changes that can inflate pension benefits.
The legislation exempts law enforcement categories, or about a third of state workers, including state troopers, prison guards and game wardens.
House Majority Leader Dave Reed, R-Indiana, said the bill was seven years in the making and its effects will be felt long into the future.
“Pension reform is not about immediate gratification,” Reed said. “It’s not about an immediate budget solution. Unfortunately, too many generations of legislators felt that was the goal of pension reform.”
House Minority Leader Frank Dermody, D-Allegheny, called the bill a “measured and reasonable” compromise after Democrats fended off Republican proposals in previous years to slash benefits more steeply.
Rep. Bryan Barbin, D-Cambria, who voted against the bill, said lawmakers needed more information about how it would affect the pension debt, referred to as an unfunded liability.
“This bill does nothing to deal with the unfunded liability, and until we deal with the unfunded liability your guess is as good as mine how much we will owe five years from today or 10 years from today,” Barbin said.