HARRISBURG — In response to the House today passing legislation providing a cost-of-living adjustment (COLA) to state employees and teachers who retired before July 1, 2001, Rep. Brad Roae (R-Crawford/Erie), Republican chairman of the House State Government Committee, issued the following statement:
“I voted no on the $1.8 billion COLA pension increase for long-time retired school and state employees who left employment prior to 2001. The Public School Employees’ Retirement System (PSERS) and State Employee Retirement System (SERS) pension funds already have a $60 billion unfunded liability and this would add to that. School districts would also have to increase school property taxes to fund the COLA. They currently pay 34.73 cents to PSERS for every $1 of payroll, and it would go up about 8/10 of 1% to 35.54 cents per $1 of payroll. A school district with a $25 million payroll would have to pay about $200,000 more to PSERS on top of the $8,682,500 they are already contributing. School property tax payers cannot afford to pay even more.
“It should be noted that 100% of retirees have always received 100% of the pension benefits they earned. Everyone who receives a PSERS or SERS pension completed the paperwork to be in the pension and knew how pensions are calculated.
“About 99% of the people who receive a PSERS or SERS pension also collect Social Security. Most people who retire from the private sector only receive Social Security.
“The pension formula results in a pension that is 70% of what a person was making after 35 years of service. The average state retiree who would get a COLA was only 59 years old when they retired, and the average school employee was only 61. Most people who work in the private sector must work until they are 65 or 67 to earn a decent Social Security benefit and have no employer pension. Retiring at a significantly lower age than normal does create an issue with inflation, but school property tax payers should not have to finance choices that other people made.
“In addition, virtually all state employee retirees have almost free state health insurance, and many school districts also offer that, while others give a significant subsidy to help retirees pay for health insurance. Very few employers in the private sector offer almost free retiree health insurance. Many retirees from the private sector pay several hundred dollars a month for health insurance and can only afford to retire once they become eligible for Medicare at age 65. As such the financial challenges of retired school employees and state employees are significantly less compared to those who retire from the private sector.
“A good example of helping all low-income retirees was the recent expansion of the Property Tax/Rent Rebate Program that increased the income eligibility limits and also increased the maximum refunds. I supported that legislation, and it is funded by casino gambling revenue so it does not compete with other government functions that are primarily funded by the sales and use tax, Personal Income Tax and corporate taxes. We should focus on helping all low-income seniors, not just some retired school employees and retired state employees.
“To put things into perspective, the entire Pennsylvania General Fund Budget is $45 billion. It is terrifying that the unfunded pension liability is $60 billion. We could cancel state government for an entire year and put 100% of the tax revenue to paying off unfunded pension liabilities, and we would still have an unfunded pension liability. It would take one and a half years of spending to pay off the unfunded pension liability. But even that number assumes that for the next 25 years the percentage rate of return on pension fund investments would have to achieve the assumed rate of return every year.
“I view a major part of my job as protecting the finances of Pennsylvania, so I cannot vote to risk the state finances and put the taxpayers on the hook to pay even more. I am certain I will receive some pushback for my negative vote, but I always try to do the right thing and protect the taxpayers.”
The 6th Legislative District includes the city of Meadville; Beaver, Conneaut, East Fairfield, East Fallowfield, East Mead, Fairfield, Greenwood, Hayfield, North Shenango, Pine, Randolph, Sadsbury, South Shenango, Spring, Summerhill, Summit, Union, Vernon, Wayne, West Fallowfield, West Mead and West Shenango townships; and Cochranton, Conneaut Lake, Conneautville, Linesville and Springboro boroughs in Crawford County and Conneaut, Elk Creek and Springfield townships and Albion and Cranesville boroughs in Erie County.
Representative Brad Roae
Pennsylvania House of Representatives