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Dear Representative:

     On behalf of the National Taxpayers Union’s 17,000 members in Pennsylvania, I urge you to reject House Bill 2497, which would bail out public employee union pensions.

     Pennsylvania’s largest and most generous public employee pension plans are severely underfunded and in need of serious reform. In Fiscal Years 2009-10, Pennsylvania taxpayers paid $843 million toward the Public School Employees Retirement System and the State Employees Retirement System. But starting in FY 2012-13, taxpayers will have to contribute $5.3 billion, an effective increase of $1,360 in state and local taxes per household, to maintain the systems.

     But instead of making necessary and prudent changes, HB 2497 merely defers pension payments well into the future. By putting off payments, HB 2497 does not fix the plans’ underlying problems or save taxpayers money; it only makes the problem worse. In 14 years, taxpayers will have to pay substantially more to sustain the system due to HB 2497’s risky assumptions about plan returns. In short, HB 2947 will force the children and grandchildren of Pennsylvania’s current taxpayers to pay for fiscal irresponsibility they did not cause.

     Instead of kicking the can down the road, Pennsylvania should make real reforms to sustain its public employee pensions, such as moving to defined-contribution retirement plans. These arrangements, in which both employers and employees contribute funds, are more affordable and predictable. Defined-contribution plans like 401(k)s have become the vehicle of choice in the private sector and have been adopted by other state governments such as Alaska and Michigan. Further, an April 2010 poll showed that 54 percent of Pennsylvanians support moving new government employees into defined contribution plans.

     There is no question that Pennsylvania’s public employee pensions are in need of reform. But foisting payments onto the next generation of taxpayers, as HB 2497 would do, is not reform; it’s recklessness. Our members are counting on you to do the right thing by rejecting HB 2497 and working for real reforms.

Sincerely,

John Stephenson
State Government Affairs Manager