Gov. Tom Corbett on Thursday deleted $72.5 million of funding from the General Assembly's plan in line-item vetoes while signing Pennsylvania's $29.1 billion budget.
Corbett repeated his call for an overhaul of the state's public employee pension system, while stopping short of a call for a special session on pensions.
"All options are on the table," he told reporters at a press conference in Harrisburg.
Pennsylvania's pension funding level has repeatedly come under bond rating agency glare. Standard & Poor's warned in April it could lower Pennsylvania's general obligation rating from AA if pension overhaul remains stalled. Last year, Fitch downgraded the state to AA from AA-plus, citing pensions. Moody's Investors Service assigns an Aa2 rating.
"It's time to stop talking around the edges and enact meaningful reform," the governor said.
A Corbett-supported bill to merge defined-benefit and defined-contribution plans for state and school employees under a so-called hybrid plan stalled in the legislature.
The state's major employee pension funds are the State Employees Retirement System and the Public School Employees Retirement System.
"Pennsylvania needs to finally begin properly funding its major pension systems of PSERS and SERS by contributing at least the actuarially recommended contribution. This would entail at least an additional $1.2 billion at the state and local levels combined," said Richard Dreyfuss, an adjunct fellow at the Manhattan Institute for Policy Research. "This amount would be over and above that in the fiscal 2014-15 state and local budgets. This is the recurring message noted in the successive credit downgrades."
Instead, said Dreyfuss, the new budget continues underfunding these plans, which only adds to the unfunded liability. "A defined contribution plan for all new hires should augment this reform strategy not supersede it," Dreyfuss added.
According to Corbett, the state's unfunded pension liability would spike from $50 billion to $65 billion in three years. He said Pennsylvania spends 63 cents of every new dollar on pensions.
Corbett's line-item vetoes include $65 million in General Assembly spending and $7.2 million in legislative designation spending from the plan that lawmakers sent him last week. He noted that the plan increased the General Assembly's budget by $320 million.
Lawmakers last week passed the mainstream budget and earlier this week enacted the companion fiscal code.
To get action on pensions, the governor thus would need greater cooperation from a legislature whose budget he just whacked.
Corbett's Republican party has a majority in both legislative houses, but he has been unable to rally them behind many of his major initiatives, although last fall they finally passed a $45 billion transportation bill.
Pension overhaul has failed to gain traction, as have liquor and lottery privatization attempts over the past two years.
Corbett, a first-term governor, is battling low poll numbers as he runs for re-election against Democratic businessman and former state revenue secretary Tom Wolf of York.
The governor lambasted public-sector unions for blocking pension changes. The state's major employee pension funds are the State Employees Retirement System and the Public School Employees Retirement System.
A bill enabling Philadelphia to pass a $2-per-pack increase in the cigarette tax to help fund its teetering school district is stalled in the General Assembly amid 11th-hour Senate amendments such as authorizations for local hotel taxes in several communities.
The House must pass the bill, which state and school system officials say could provide $83 million. The House is scheduled to reconvene Aug. 4. Philadelphia Mayor Michael Nutter said the school system is "caught in a vortex of political hell."
Corbett on Thursday called on public-sector unions in Philadelphia to compromise. "I want to see these schools open on time. All parties must step up. The school district, the city and the state have stepped up. We need the public-sector unions in Philadelphia to step up and make concessions."