Contact Information 

Meadville District Office
900-920 Water Street
Downtown Mall
Meadville, PA  16335
Phone (814) 336-1136
Hours 8 a.m.- 4:00 p.m. (M-F)

Fairview Office (Mondays Only)
Fairview Township Building
7471 McCray Rd., Fairview, PA
Hours 9 a.m. - 4 p.m. (Monday)
1-800-770-2377

Cranesville Office (Thursdays Only)
Cranesville Borough Office
10195 John Williams Ave.
Cranesville, PA 16410
Phone: 1-800-770-2377
Hours 9 a.m. - 3 p.m. (Thursday)

Capitol Office
Hon. Brad Roae
151 East Wing
Harrisburg PA 17120-2006
Phone: (717) 787-2353
Fax: 717-782-2902

E-mail:
  broae@pahousegop.com

Q & A - Public Pension Reform Update
5/9/2013

QUESTION:  What is the status of the Commonwealth’s public pension systems and the governor’s reform proposal?

ANSWER:  The Commonwealth oversees two public pension systems.  The State Employees’ Retirement System (SERS) provides pensions for state workers.  The Public School Employees’ Retirement System (PSERS) provides pensions for teachers and other school employees.

Together the two pension plans are underfunded by $47 billion.  That means there is only approximately 63 cents in the plans for every dollar of benefits that are owed to state employees and school employees.

When the new state budget is enacted and takes effect on July 1, the state will have to spend approximately $1.5 billion to fund the pension plans.  If the Commonwealth fails to change the pension plans, four years from now taxpayers will have to nearly triple their contribution to $4.3 billion each year.  The pension plans are on an unsustainable path and the General Assembly would have to cut nearly $3 billion in other items in the $28.5 billion state budget to make the higher payments.

In 2008, the Titusville Area School District had $650,000 in its budget that was used to pay for the PSERS pension fund.   It is $1.6 million in this school year’s budget and by 2017 it will grow to $3.8 million.    According to the Pennsylvania Department of Education, the salary and benefit cost for the average teacher in Titusville is approximately $71,000 a year.   The projected $2.2 million increase in pension payments by 2017 is the equivalent of the cost of 31 teachers.

The Pre-Act 120 plan provides an employee who retires after 35 years of service a pension that equals approximately 87.5 percent of the person’s final average salary.  Those pensions are exempt from the Pennsylvania Personal Income Tax (PIT) and approximately 99 percent of the retirees also qualify for Social Security.  The proposal would change the pension after 35 years of service to 70 percent of final average salary.

State employees’ and teachers’ pensions are calculated using a formula.  That formula takes into account the number of years of service and the final average salary of the worker.  It also includes a “multiplier.”  Prior to 2001, the multiplier was 2 percent for each year of service, but it was changed to 2.5 percent in 2001.  The proposal would change it back to 2.0 percent, but only for future years of service.

No changes at all would be made in pensions for people who are already retired.  No changes at all would be made for current employees for years of service already completed.  The only change for current employees that would take place would be for the multiplier to be changed back to what it always was prior to 2001.

There is even a two-year transition period before the new rate would take effect, so teachers and state employees who are two years away from retirement would not have any changes at all to their pensions.  For a person who retires three years from now after 35 years, rather than have a pension that is 87.5 percent of their final average salary, it would be 87 percent of final average salary – just a 0.5 percent reduction in the pension amount.

Even an employee who is 10 years away from retirement would receive a pension of 82.5 percent of his or her average salary rather than 87.5 percent.  These are changes that would save taxpayers billions of dollars over time.  Legislators, state workers and school employees would all be impacted by the changes.

The pension multiplier increase in 2001, a cost-of-living adjustment shortly thereafter, low contribution rates by the Commonwealth and other parties during the previous decade and the stock market crash all contributed to the unfunded pension systems.  I was not in office when those decisions were made by the General Assembly and previous governors and the state workers and teachers are not at fault for the problem, but everyone will be impacted by the changes.  We cannot spend money that we do not have and we do not have the funds to make the higher pension payments.
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