by State Senator Art Haywood (D-Montgomery County and Philadelphia)
Contrary to the claim that the Senate GOP plan will help fix Pennsylvania’s pension problem, the plan does nothing to address our $58 billion pension deficit. Instead, Senate Bill 1 exacerbates the disaster we really face: the retirement crisis.
Let’s make this simple. Pennsylvania will see a large share of our population retire in the next 40 years. We have the second highest population of retirees over the age of 65, and that number is growing. Many retirees will live beyond age 80.
According to the Employee Benefit Research Institute most people who retire today have less than $25,000 in retirement savings accounts and nearly a third have less than $1,000 saved. That’s not enough money to last three years, let alone the 15 or 20 years a retiree may expect to live. As a result, retirees in their late 80s often run out of money. Many are forced to rely on public benefits.
The balloon of thousands of seniors in poverty will explode in our commonwealth if SB1 becomes law. Under the Senate GOP scheme, new school teachers, correctional officers, and all other state and school employees would receive retirement income that will put them in or near poverty. According to the Public School Employees’ Retirement System (PSERS), a new school teacher with 35 years on the job who retires at age 65 with a final salary of $72,592 will receive only $14,843 in retirement. That’s about 20 percent of a new teacher’s final pay, putting retired teachers barely above the poverty line of $11,770 for a single-person household. Senate Bill 1 changes retirement in dignity to retirement in poverty.
Not only does the Senate GOP plan force longtime, hardworking employees to retire in poverty, but the scheme would crush communities across Pennsylvania. According to Keystone Research, the 70 percent cut in retiree benefits predicted by PSERS will cause a recession in our commonwealth. SB1 would take about $9 billion dollars in retiree spending out of communities, stores and businesses.
The collapse of retiree spending will devastate stores, communities and small towns across Pennsylvania. And, with thousands of retirees in poverty, many will require food stamps and cash assistance to survive. If Pennsylvania does not make the commitment to a dignified retirement now, taxpayers will face the burden of rising public assistance costs – and another recession – in the future.
The Senate GOP plan not only sentences new employees to retirement in poverty, but it makes illegal changes to current employees’ benefits. An employer cannot take away benefits that were a condition of employment. Pennsylvania courts have repeatedly ruled that taking away agreed upon benefits from current employees is unconstitutional. If passed, this plan will be challenged and defeated, generating costly litigation for taxpayers.
The Senate GOP plan does nothing to address the $58 billion that is now due to current employees who retire. This is the real pension problem Pennsylvania faces, and a solution has been presented by Governor Wolf. The Governor is proposing a pension plan that would provide short-term funding to limit the increasing pension payments in the next few years. This plan would maintain the state’s commitment to making payments, which Pennsylvania cannot avoid. The Governor’s plan does not compromise the commitment our commonwealth must make to retirement in dignity. It is a constitutional plan that will not ask taxpayers to suffer the consequences of a retirement crisis.
Pennsylvanians should not be fooled by the Senate GOP pension proposal. A pension plan that doesn’t address our $58 billion deficit isn’t a pension solution. A pension plan that is illegal and will require costly litigation isn’t a pension solution. A pension plan that exacerbates the retirement crisis, forcing thousands into poverty and causing an economic recession, isn’t a pension solution. The voice of Pennsylvanians must be clear: Senate Bill 1 isn’t a pension solution. It’s a disaster. Don’t be fooled.
State Senator Art Haywood (D-Montgomery County and Philadelphia) is Aging and Youth Committee, Minority Chair, Finance Committee member.