SCRANTON, Pa. — To no one's surprise, Gov. Tom Wolf is expected Monday to veto a bill that would force new state hires into a 401(k)-style defined contribution plan.
Wolf, a first-year Democratic governor, vetoed a liquor-privatization bill on Thursday that the Republican-dominated legislature passed.
"It makes bad business sense for the commonwealth and consumers to sell off an asset, especially before maximizing its value," said Wolf.
Wolf and Republican leaders, meanwhile, will resume discussions over the $30.2 billion budget that Wolf also vetoed. The fiscal year has begun, and essential state operations will continue. The Republicans' spending plan made cuts to education, while Wolf wants a $1 billion severance tax on Marcellus Shale natural gas production. He also seeks a variety of other taxes.
The budget lawmakers sent him, said Wolf, relies on more than $1.5 billion in one-time revenues, payment delays into the next fiscal year, and fund transfers.
"It is not a balanced budget and it will lead to a $3 billion deficit and credit downgrades for the commonwealth," he said.
Pennsylvania's pension funds, the State Employees' Retirement System and the Public School Employees' Retirement System, have a combined liability of about $53 billion. Wolf's budget calls for issuing $3 billion in pension obligation bonds while he opposes the GOP-backed bill, Senate Bill 1, which calls for the plan-design changes, notably to moving of new employees from a traditional defined-benefit plan to the 401(k)-style plan.
All three major credit-rating agencies downgraded Pennsylvania last year, citing pension shortfalls and funding imbalance. Moody's Investors Service rates the commonwealth's general-obligation bonds Aa3. Fitch Ratings and Standard & Poor's rate them AA-minus.
Critics of Senate Bill 1 say plan-design changes on state pension plans do not grasp the underfunding problem. Pennsylvania has not fully funded its actuarially required contribution, or ARC, since 2004.
"SB1 will do little to change that behavior," said Rep. John McGinnis, R-Logan Township.
McGinnis cited data from Pew Charitable Trusts pegging the state as next to last in funding its pensions. The interest alone on pension debt is nearly $4 billion a year and rising, he added -equal to full salary and benefits for 50,000 teachers.
During floor debate last week, he added sarcastically: "Perhaps I can offer a suggestion on how to raise some new revenues. Let's pass a gaming law establishing a betting pool on when the next downgrade of Pennsylvania's credit will take place and a megapool on when the assets of SERS and PSERS are fully depleted.
"Of course, the pool on credit downgrades can be ongoing because we are certain to see that streak of infamy continue well into the future."
