Pension White Paper Shows That Governor's Proposal to Move New Hires Into 401k Type Pensions Will Lead to Higher Costs for Taxpayers and Increases the Unfunded Liability
HARRISBURG, Pa., Feb. 26, 2013 /PRNewswire-USNewswire/ -- Pennsylvania AFL-CIO President Rick Bloomingdale and Secretary-Treasurer Frank Snyder said that a white paper released today by a Harrisburg-based think tank should continue to prompt Legislators and the public to closely examine and ask questions about the increased costs of moving future school and state employees into a 401k pension.
A white paper on pensions released by the Keystone Research Center today, shows that key parts of the Governor's pension proposal will actually increase costs for state, school districts, and ultimately taxpayers. The white paper was presented to news reporters by Dr. Stephen Herzenberg, Executive Director of the Keystone Research Center and State Treasurer Rob McCord in a tele-conference call. The White paper shows that more than a dozen states, that have carefully examined proposals similar to the Governor's, have concluded it is not the best course of action, in part because it would increase costs and unfunded liabilities.
"It is critical that the public and our elected officials have all of the facts and information about this key issue before making a decision. This report draws upon solid economic analysis and the experiences of other states, indicating that the Governor's proposal to begin enrolling new hires in a 401k type of pension will dramatically increase costs for the state, school districts, and ultimately taxpayers. Contrary to perceptions and myths, the Governor's plan increases costs to taxpayers by establishing two pension systems in which employer and employee contributions are siphoned away from the defined benefit plan. This leads to higher costs and unfunded liabilities to fulfill the obligations of retiring employees in the future," Bloomingdale said.
"We urge our state legislators to look at all of the facts and the experiences of other states and to not have their decision clouded by myths and ideologies. The truth is several states have already tried the approach that the Governor is proposing and it has failed to deliver on the promises made by its supporters. We urge our legislators to ask the important questions that this report poses as they examine the Governor's proposals: how much will be lost in investment earnings with pension restructuring and how much taxpayers will be on the hook when it happens," Snyder added.
The White Paper can be viewed on the Center's website: keystoneresearch.org/pensions
SOURCE Pennsylvania AFL-CIO