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Presented to the Lehigh Valley Central Labor Council Wednesday, February 6, 2013

Preserving State Employee Pension Funds in Pennsylvania How did we get here…. and where are we going?. Presented to the Lehigh Valley Central Labor Council Wednesday, February 6, 2013 SOURCES FOR THIS PRESENTATION PROVIDED UPON REQUEST. Wisconsin: A Cautionary Tale.

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Presented to the Lehigh Valley Central Labor Council Wednesday, February 6, 2013

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  1. Preserving State Employee Pension Funds in PennsylvaniaHow did we get here….and where are we going? Presented to the Lehigh Valley Central Labor Council Wednesday, February 6, 2013 SOURCES FOR THIS PRESENTATION PROVIDED UPON REQUEST

  2. Wisconsin: A Cautionary Tale This snarling badger (also the state animal of Wisconsin) represents the movement to defend collective bargaining rights that began on February 13, 2011…… The snarling badgers made one crucial mistake.

  3. Wisconsin continued…. They stopped doing this. That was mistake #1.

  4. What does WI have to do with PA? National, well-funded conservative agenda to destroy collective bargaining rights for public workers AND undermine their defined benefit pensions, so the membership begins to ask…. “What is the purpose of my union?” The public is now involved in the debate…. How do we redirect the discussion? How do we talk to “taxpayers”?

  5. Act 120/2010 Pension Reform Law Did Not…. • Replace the defined benefit plan with a defined contribution plan. • Create an optional defined contribution plan. • Reduce benefits for current employees.

  6. Act 120/2010 Pension Reform Law CHANGES TO FUNDING: • Ended employer contribution holiday • Eliminated 2012 rate spike • Committed employers to stepped up contributions subject to rate collars

  7. The 2010 Pension Reform Laweliminated the 2012-13 rate spike.(Projected ECRs for PSERS) 2012-13 Rate Spike

  8. 2010 Pension Reform Law:Cut the Long-Term Costs CHANGES IN BENEFITS for PSERS (New Hires Only): • Dropped Multiplier to 2.0% with Option of 2.5% if member pays full cost difference • Increased age for full retirement to 65 or “Rule of 92” w/35 years of service • Eliminated the Option 4 lump sum withdrawals • Increased vesting period to 10 years • Increased the cost of the purchase of credit for non-school service (except for military service)

  9. Total ECR Unfunded Liability Rate

  10. It’s in the numbers:Pension reform can only have a “marginal” impact on the challenge at hand. The challenge is paying for the benefits that have already been earned but are not properly funded.

  11. Divide and Conquer = Generational conflict We will pay!! Weakens the existing plans with potential for default Proposed alternative plans ACTUALLY COST MORE!!!

  12. So, Now What? Proposed Changes • No retirement: do away with all retirement savings vehicles for employees to eliminate Employer’s RISK altogether. • Defined contribution plan: 401(k) accounts created with potential for a “choice” between defined benefit and defined contribution. • Hybrid plan: defined benefit with 401(k) on top. • Cash balance plan: Employer contribution is fixed (and very low) while employee benefit is fixed (and even lower)

  13. Why Now? The pension liability has to be dealt with; that’s true. The CLEAR Coalition (Coalition for Labor Engagement and Accountable Revenues, www.clearforpa.org-- PSEA, AFSCME, AFT, APSCUF, IAFF, SEIU, UFCW) has identified additional revenue streams. However, Governor Corbett and his allies have arbitrarily made “pension reform” their #1 priority for the 2013 Budget.

  14. Pardon me? Can you please repeat that? "I equate that to a Pac-Man or a tapeworm eating up the budget," Corbett said. "I do not see the economy growing at that kind of rate and even if it did, it would just keep us even. If we do not address this pension issue now, we will be worrying about how we pay for the pensions and won't be able to pay for other needed services.“ “Corbett wants to confront Pa. pension costs 'tapeworm‘” by Marc Levy, The Sentinel (published online May 6, 2012) http://cumberlink.com/news/local/govt-and-politics/corbett-wants-to-confront-pa-pension-costs-tapeworm/article_a34f3d12-9793-11e1-a979-001a4bcf887a.html

  15. Who “Deserves” Retirement? "I think personally that we can't continue to have a public sector retirement plan which is defined benefit while the private sector continues to move everyday toward defined contribution," said Pileggi. "I don't think that's sustainable. I don't think taxpayers will continue to accept a different retirement plan for government employees paid for with their tax dollars than they have themselves. Whether we're going to change it this year or next year or five years from now, I don't think the current model is sustainable. Now if the private sector comes back to the defined benefit world, then maybe it is sustainable. But the trends don't seem to be going in that direction.“ -Senate Majority leader Dominic Pileggi, February 5, 2013 Quote featured in Patriot-News article 2/5/13: “Details of Corbett’s cut and collar pension plan,” by Donald Gilliland. http://www.pennlive.com/midstate/index.ssf/2013/02/pennsylvania_budget_-_details.html#incart_river_default

  16. Corbett’s 2013 Pension Reform “Plan” • Makes the pension debt (also known as the “unfunded liability”) WORSE; this is a liability that has already been accrued over decades • Cuts benefits for current employees by tinkering with the “plan design” • Will immediately land the Commonwealth in lengthy, EXPENSIVE legal battles regarding “impairment of contract” law • Kicks the can, again, and authorizes the Commonwealth to avoid its responsibility!

  17. Contact Your State Legislator: • Call your State Senator or State Representative and ask him or her: • “How are you going to fund pensions for current and future state workers?” • “What about benefits for current and future retirees if the system is broken?” • “Why are you doing this now? What about Act 120?” • “Live up to your commitment and let Act 120 work!” Important: write down what they say, or request a response from them in writing!

  18. Contact Your State Legislator cont. 2. Schedule a meeting with your State Legislator in his/her home district, and invite other constituents! • “How are you going to fund pensions for current and future state workers?” • “What about benefits for current retirees if the system is broken?” • “Why are you doing this now? What about Act 120?” • “Keep your end of the deal—Let Act 120 work” Take notes! These meetings are vital!

  19. What’s Next: Be Prepared • Get informed! Read everything you can get your hands on. • Request meetings with your legislators and tell EVERYONE to do the same. • Inform and organize your family, friends, neighbors, former colleagues, community leaders; this affects us all. • This is not about political ideology.

  20. THANK YOU! Questions, Concerns, Comments? Jennifer Blatz Pension Coordinator Pennsylvania AFL-CIO Cell: 617-501-9470 Email: jblatz@paaflcio.org

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