Historic Pension Reform Passed By General Assembly

(HARRISBURG) – The Pennsylvania General Assembly has passed historic, bi-partisan legislation to change the pension system for future school and state employees, according to Senator John R. Gordner (R-27). 

Senate Bill 1, sponsored by Senator Jake Corman (R-34), passed the House of Representatives today by a vote of 143-53.  It previously passed the Senate on Monday, June 5, 2017 by a vote of 40-9.

The initial cause of the on-going pension crisis was legislation in 2001 that provided higher levels of guaranteed benefits for future retirees.  This was exacerbated by a combination of two factors: the lack of the state making its required payments to the system over multiple years during the Rendell administration and the economic turndown after September 2001 and the recession of 2008, resulting in lower-than-anticipated market returns.  As a result, the combined employer contributions have gone from $1 billion in the 2010-11 Fiscal Year to $6 billion for the 2017-18 Fiscal Year to help make up for the shortfalls.

This has caused a great deal of financial stress on school and state budgets alike.  SB 1 addresses the root of the crisis and allows the Commonwealth to “stop the bleeding” that has resulted in difficult school district and state budgets.

“I did not vote in favor of the 2001 changes to the pension system and I did not accept the higher increase in pension that was made available to me as a result of it,” said Senator Gordner. 

“I was pleased to partner with Senator Corman and the rest of the Senate Republican leadership team to lead the charge, over several years, in forcing action by the General Assembly to address this fiscally trying situation,” added Senator Gordner.  “This bill represents a compromise that will result in the balance between protecting the interests of our taxpayers while providing competitive retirement benefits to attract talented new employees in the future.”

The provisions of SB 1 will only apply to new employees, who will have the option of choosing between three options.  One is a full 401(k)-style plan and the other two are variations on a hybrid benefit plan.  Current employees will also be given the opportunity to opt into one of these new plans.

The shift to a new system will result in several billion dollars in savings over the coming years.  The Pew Charitable Trusts, a non-partisan organization that utilizes analytical approaches to improve public policy, has declared that SB 1 would one of the most comprehensive and impactful pension reforms that any state has enacted in the last 30 years.

The measure now goes to Governor Tom Wolf, who is anticipated to sign the legislation into law. 

CONTACT:  Mike Stephens (717) 787-8928