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Pennsylvania Cannot Afford the Status Quo When it Comes to Public Pensions
9/22/2014
By State Rep. Mike Tobash (R-Schuylkill/Berks)

I need to reiterate why Pennsylvania cannot afford the “status quo” when it comes to our state’s public pension system, which currently is sitting $50 billion in the red. I have been working from the front on this issue for months, and I hope the legislature gets an opportunity to vote on the hybrid plan solution we are offering to take the next step in getting us back on track.

Let’s look at the facts.

Last year, the Commonwealth and its school districts paid $3.2 billion for public pensions, as required by current law. In just five years that figure will increase to $6.8 billion.

The reality is that our public pension system is grossly underfunded, and previous efforts to address the pension problem have been insufficient. Act 120, a measure passed in 2010, was important to addressing budgetary concerns the state was facing at the time. However, this law is the status quo, and it is no longer adequate. Standard and Poor’s, a rating service that helps to determine the state’s credit worthiness, has lowered our rating again because of the way we are treating our pension debt.

We have introduced a hybrid pension plan solution that could save $15 billion (or more) over 30 years. Let’s compare that to Act 120, which generated net savings of less than $3 billion over 34 years. Additionally, the solution we are offering gets us to solvency seven years faster than “the status quo.” A healthy public pension funding ratio, (meaning, the assets we have versus the liabilities we have committed to pay) is 80 percent, but we are currently only 62 percent funded. The hybrid plan would get us to a healthy funding ratio faster than current law.

Act 120 was a bandage that bought us three years. It hasn’t stopped the bleeding from within the system, it simply bought us more time. The hybrid plan solution will be the next step to a sustainable pension system.

The hybrid plan does not reduce employer contributions, as doing so at this time would be reckless and irresponsible. It would be the equivalent of making less than the minimum payment on a huge credit card debt. Paying less than the minimum only kicks the can further down an expensive road. It’s not fiscally responsible, and it’s not a smart solution to getting Pennsylvania out of its $50 billion public pension debt.

Details of my hybrid plan solution are available at PANeedsPensionReform.com.

Representative Mike Tobash
125th District
Pennsylvania House of Representatives

Media Contact: Krisinda Corbin
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