Pennsylvania pension and tax reform

TOO LITTLE, BUT A START

PROPERTY TAX BILL INTRODUCED IN SENATE

 

 

 

The Pension reform bill passed both sides of the legislature and is now expected to be signed by Gov. Wolf. While it is a step in the right direction, it will need to be addressed again in the future. It moves to put new hires into a 401 type pension plan, raise contributions of existing employees, and makes other minor changes.

 

The Pension fund is now unfunded by over $60 billion and possibly $74 billion depending how it is calculated. It paid out $4.8 billion in 2016 and is excepted to rise to $7.3 billion by 2025. Most of the provisions will not come into effect till 2019. If changes would have been made 10 years ago when the problem became evident, it could be well on its way to sustainability.These changes may be too little too late. The economic well being of school districts, and the state in general is being hampered by this pension plan.

 

The Senate has introduced Act 76 this past week, it has 20 sponsors in the senate and 4 in the committee. It is very possible to pass the senate this year. This bill would eliminate the property tax and replace it with raises in the income and sales tax. Its future in the house is not clear and whether the governor would sign such a bill is unclear. You can expect this issue to be a campaign issue in the future.

 

Fiscal reform is needed in this state if it is going to be competitive in attracting business. While we see at least an acknowledgment that reform is necessary it will be a contest between special interests and the well being of the whole state. Things may have to decline further till real action is taken.