Why Pennsylvania needs Public Sector pension reform

Governor Corbett discusses pension reform in Dresher

Governor Corbett discusses pension reform in Dresher

Last week I had an opportunity to attend one of Governor Tom Corbett‘s mini-town hall meetings on Pennsylvania‘s precarious public pension situation.

The Governor is spending a lot of time this Summer pushing the need for public sector pension reform to improve the State’s financial health and put a lid on spiraling property taxes.  The problem he is facing is that the Pennsylvanians who pay taxes do not view Pension Reform as a problem let alone a problem-with-high-priority.

Much of this disconnect comes from the plain fact that most voters do not understand how State pensions work; how much they cost; or how they affect the other real problems with which my fellow Pennsylvanians can readily identify.

Recent polls (Quinnipiac University 2013, Franklin & Marshall 2014) found that Pennsylvanians recognized Unemployment, the Economy, Education, and Taxes as the biggest problems being faced in the Keystone State. These opinions are even more disconcerting from a taxpayer’s point-of-view, because it illustrates a very basic fact about the magnitude of the pension problem …

Few appreciate how the State’s pension mess plays into the perceived problems in Education, Taxes and the Economic Health of Pennsylvania.

For that you must look at the numbers.

  • $47,000,000,000. (billion with a capital “B”) … The current pension funding gap in Pennsylvania
  • $65,000,000,000. (also with a “B”) … The projected pension gap by 2019.
  • 63 cents of every $1 in revenue … 63% of PA State revenue currently goes to cover State pension responsibilities
    • That is, $2 Billion per year, all covered by PA tax payers
  • $13,000. … The amount each Pennsylvanian would have to pay to cover the current pension fund gap.

State-pensionsForty-one percent (41%) of the annual State budget goes to Education funding.  Another 40% goes to support Health and Human Services (and yes, that’s BEFORE you factor in the potential of accepting ObamaCare’s proposed Medicaid expansion, which will be funded by the Federal Government to only 90% of costs after 2016) …

The budget percentages for Education and HHS are equally important in understanding the overall picture.  Why?

For one, they illustrate the impact both Education and Social Services have on the State budget.  When you spend 81-82% of your budget in two specific areas, it does not leave much room for the other good things State government can do.  These huge obligations place the State in a financial straight jacket.  Pension costs make up a significant burden to school districts and public healthcare providers insofar as those costs are a subset of whatever funding is provided by the State.

As an example, when a School District receives its annual budgeted funding, they must – each and every year – immediately set aside a significant portion of that funding to be applied towards that school district’s allotment of pension coverage.  As pensions costs grow, school districts are forced to pay more and more for their pension service; meaning they will have less and less to spend on actual education.

pension-reformSo when you speak of those “real problems” facing Pennsylvania … Education, Unemployment, the Economy and Taxes … there is a genuine, behind-the-scenes connection between pension costs obligations and all those REAL problems.  And more importantly, to financing any solutions to those REAL problems.

So what’s State and local Government to do?  What tough choices do you make now?  Do you raise Property Taxes again?  Do you raise Corporate Taxes in a state which is already has the HIGHEST corporate tax rate in the country?  Or do you do something about the most easily identifiable and underlying problem?

As a taxpayer, this is a chilling reality.  If you subscribe to the theory that high taxes kill Economic Growth, raising Corporate Taxes is not the BEST alternative.  (And yes, that also goes for a Job Creator like the Natural Gas Industry.)  Neither is raising Property Taxes, which is what school districts must do to meet the growing pension budget hole.

Pension reform won’t lower current property taxes however.  Replacing pension plans does nothing to alleviate the pension obligations already facing the State and local school districts.  It’s a solution for the future, by putting a lid on rising property taxes by replacing an unsustainable pension structure with one that lessens the future burden on taxpayers!

If you are not yet convinced, take a look at recent examples in countries like Greece and Italy, where excessive pension costs drove cataclysmic threats to economic stability.  Or take a look closer to home …

CT Emanuel_Method_04.JPG

Chicago Mayor – and former White House Chief-of-Staff Rahm Emanuel

When uber-Liberal Rahm Emanuel left the cozy confines of The White House as President Obama’s Chief-of-Staff to become the Mayor of Chicago, the first major initiative he undertook was to tackle Chicago’s financially threatening pension problem.  To take a peek at what could happen to cities in Pennsylvania if leaders do nothing, look at what has happened in Detroit!

The Rahm Emanuel story is critically important for one reason many people might overlook.  It illustrates that this is not a problem restricted to one political party or the other.  Pension costs with all its ramifications – from taxes to education to health services to economic vitality – is a Democrat and Republican problem.

So what is the real problem with Pennsylvania’s nightmare pension scenario?  It’s reliance upon Defined-Benefit public pensions …

This is not a new problem, not in the pubic sector, not in the private sector, not in the manufacturing sector, not in the financial industry.  Individual companies, whole industries, other States, even the Federal Government have recognized the threat to financial stability presented by growing defined-benefit pension obligations.

In the interest of full disclosure, I am employed in the Public Sector by the Federal Government since 1980.  In 1986 the federal government introduced a two-tier retirement system under the Federal Employees Retirement System Act of 1986.  The Act essentially grand-fathered all existing employees under the existing Civil Service Retirement System (CSRS), while requiring all new employees – hired after the laws effective date – to participate in the Federal Employees Retirement System (FERS).  The reasoning behind the switch from a Defined-Benefit CSRS to a hybrid Defined-Benefit/Defined-Contribution plan was much the same in 1986 as it is now for Pennsylvania in 2014.

This is pretty solid framework for changing Pennsylvania’s Pension Problem.  Allow those already vested in current defined-benefit pensions alone.  Address a change in pension structure only towards new employees at all levels of government!

In the Federal Government, FERS provides its own two-tiered approach, consisting of a Defined-Benefit where a minimum government contribution is mandated.  Then the federal government fully matches any employee contributions up to 5% of salary (the percentage matched drops on additional employee contributions) made to the Thrift Savings Plan (TSP), which acts essentially like a 401(k) with employees able to choose investment options of differing risk and return.

That the Federal Government is out in front of Pennsylvania on anything – by nearly three decades no less – should be more than a little troubling to Pennsylvania tax payers!  And this again is a problem whose responsibility falls squarely on BOTH political parties.

Former Gov Tom Ridge, not exactly the brightest light on pension sanity

Former Gov Tom Ridge, not exactly the brightest light on pension sanity

In 2001 it was the Tom Ridge Republican administration that cut a foggy-headed deal with the Pennsylvania House of Representatives, where both Democrats and Republicans agreed to significantly increase the pension benefits of Legislators, state workers, and teachers.  (Not surprisingly, those same Legislators all got fat pay increases as part of the deal!)  Then they compounded their stupidity by slashing the taxpayer contribution to service that very same pension obligation. 

It’s a case of an entire government turning a blind eye towards its very own economic future!

Changes to the way employee pensions are managed and financed have been rippling through the entire U.S. economy, most drastically of course in the private sector, where change depends not on the consensus of 250 State Legislators, who are so intimately tied to the very benefits economic reality demands must change.  It is virtually impossible – in this day and age – to find an employer who will provide an employee with a defined-benefit pension plan.

It’s a Republican-Democrat problem that will need both parties in the State Legislator to step up to the plate and get fixed.

Now, I’m not sure Governor Corbett’s approach is necessarily the best alternative for Pennsylvania’s particular pension situation. The devil is always in the details.  However, you must admire Corbett’s tenacity in pushing for pubic awareness of a problem very difficult to fully understand and always controversial … And for doing so during an election year!

That – my friends – is Leadership with all its risks and political exposures.  Like the national bi-annual conniption over Social Security insolvency, it’s always the first person who goes through the door that gets bloodied. 

Yet this is a problem to which even tax & spend liberal Tom Wolf has begun to awaken.  Oh wait a minute … That was for his furniture company, not necessarily the tax-paying citizens of Pennsylvania!

All politics aside, the message is clear.

If you live in Pennsylvania and believe that the REAL problems we face are Education, Taxes, and Economic Growth, you simply must recognize the threat that growing pension costs pose to the economic health of The Keystone State.  Tell this story to your Pennsylvania neighbors.  Let your voice be heard by demanding your State Representatives and Senators act together with Governor Corbett to address pension reform NOW!

Cranky Man’s Lawn Diary ’14 – Beetlejuiced

Not those Beatles ...

Not those Beatles …

The Fourth of July is behind us, and if you haven’t seen them yet, you haven’t been paying attention.  The beetles are back!

Japanese beetles live very short life spans in which to fit their two favorite – and only – activities: Eating holes in your lawn and Making hundreds of little baby beetles, a.k.a. grubs.  The grubs do the lawn eating until they’re big enough to move on to lawn orgies and maintaining the eat and spawn cycle.

Life as a summer beetle ain’t all that complicated.

Neither is the solution for your lawn.

Don’t be like me last year.  At some point I decided not to do anything about the annually anticipated Dance of the Beetles.  I hadn’t noticed much beetle “dancing” is the two previous seasons, so I thought, “What the heck? What’s the worst that can happen?”  Then I decided to complicate the problem by not reacting when we observed larger-than-normal beetles frolicking in what was certainly a form of promiscuous insect shenanigans right on the front lawn!

Well, they didn’t look like your run-of-the-mill Japanese beetles.

Yes, sometimes I need to be roused with a hard swat about the head with heavy bag of You’re-Such-An-Idiot!

That hard swat came in the form of serious dead spots and chunks of lawn you could rollup like a dead body in your aunt’s heirloom Persian rug.  It was not a good September, lawn-wise or for the body.

Is it Frolic Time already???

They said, “Try the milky spore. You’ll love it!”

After a lot of work to fix what beetles had wrought, I decided to go all microbiological warfare, consisting of a tedious application of the dreaded milky spore!  Dreaded by humans for it’s pain-in-the-nether-regions application process.  Dreaded by the beetles because … well, it’s not a nice way to depart the lawn-eating, baby-beetle-making circle-of-life.

You can read about it in the linked post; but trust me I wouldn’t want to be the beetle larvae that eats from the wrong grass root.  But effective it supposedly is, offering up to ten years of grub protection as the spore grows and multiplies.  No worries to you, the kids, your dog, or that body in auntie’s Persian rug.  The milky spore is harmless to all other species!

At this point however, I’m playing a coy waiting game.  I should have years of protection, but the milky spore needs to grow and multiply through the – ahem – judicious use of fresh and living beetle larvae.  (The icky body in the Persian rug part.)

Anyways, I figure a year or two before I’m home free and no longer in need of expensive grub treatments, often the most expensive lawn treatment for which you will normally pay.  My plan was to apply the usual grub treatment, that is until struck with the thought that I need healthy grub “hosts” to make the milky spore effective.

Such a conundrum!  Forego the recommended grub treatment to allow healthy grubs to feast on my lawn so to initiate their untimely and horrific death.

Now where did I put that carpet …???

For those of you not opting for the hideous milky spore solution to control your bug issues, make sure you purchase and apply your grub treatment this weekend. Once you see beetles cavorting on your lawn, it’s probably too late.

As for my lawn beetles …

You can run; but you can’t hide!

A Trolley unfazed and not so jolly Holly Days

photoIt’s not often that I write about my experiences as a consumer of products and services. Sometimes though, these experiences simply beg to be addressed for either for their positive or negative experiences.

This post will address an example of each.

Do Not
Eat Here …
You’ll never eat at home again!

This was the plaintive – and rather imaginative – plea and a tweak directed at a Philadelphia trade union from the good folks at the Trolley Car Diner, located on Germantown Avenue in Philly’s Mt. Airy section.

Carol and I frequent the Trolley Car as part of our pre-game ritual for “Business Person Specials” Philadelphia Phillies games that starts at 1:05 PM.  As we had the game played last Wednesday, May 14 (a sleeper of a shutout loss to the LA Angels), we headed down early for the pre-game breakfast/lunch.

It’s only called “brunch” on Sunday’s, right?

Anyways, as we turned onto Germantown Avenue, we immediately noticed signs imploring the public “Don’t Eat Here!”.  My first reaction was “Crap! Don’t tell me we have to find somewhere else to eat!”  Then as we got closer we noted more signs, including one with a likeness of the owner and another that alleged the owner’s role in depressing fair wages and benefits.

My reaction was immediate.  “Unions …”, quickly followed by ” … Philadelphia!”

Those two thoughts, neither of them presented here as negatives within themselves, seem to always be connected.  And maybe my thought process was primed a bit by the ongoing union travails and controversy at the Pennsylvania Convention Center, which included the unusual sight of union members in several trades crossing the picket lines of others.

Only in Philadelphia …

As we entered and were greeted by the host, I kiddingly asked him whether we should even eat there.  But he was immediately ready with a one-page letter, written by owner, Ken Weinstein about what was happening out front and why.  The letter, addressed “Dear Friend”, is a public relations homerun!

For my fellow Phillies fans, whose team currently ranks 28th out of 30 MLB teams in round-trippers, a homerun is a very, very good thing.  Just sayin’ …

Trolley Car Diner Mt. Airy, Philadelphia

Trolley Car Diner
Mt. Airy, Philadelphia

The crux of the matter – of course – was the inability of unionized electrical contractors to compete with subcontractors who use non-union labor.  In this case the very same International Brotherhood of Electrical Workers, led by Philly labor icon John Dougherty had out-priced themselves from a Weinstein redevelopment project.  This is one of the very same unions that had recently crossed the picket lines of Carpenters and Teamsters in the aforementioned Philadelphia Convention Center incident. 

That – my friends – is karma!

In his excellent letter to some very loyal customers, Weinstein explains his plan to rehabilitate four vacant, historical buildings that previously served St. Peter’s Episcopal Church; his hiring of a general contractor; and the effort to solicit competitive bids from both union and non-union contractors.  Weinstein’s claims that the only union contractor to bid was 35% higher than the selected non-union provider.

This should be of no surprise to anyone, nor should the union’s reaction when losing fair-and-square in the market of competitive bidding.  They picket, not the site of the prospective work to be performed, but the wholly separate earning capacity of the developer – the Trolley Car Diner – with accusations of “depressing wages” and “denying benefits”.

They are nothing, if not dogged and disingenuous as to the cause of their particular problem!

Sorry, IBEW, you get no sympathy here.

So if you get the chance, show the Trolley Car Diner some love.  With a fine menu, great food, and a nice selection of bottled craft-brewed beers, you will not be disappointed!

*  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *

Next is my negative experience with Holly Days Nursery, a well-regarded botanical nursery in Horsham.

Now, I’ll be the first to admit, I did not take my aggravation any further than the landscaping representative that decided to blow me off last Tuesday for an appointment scheduled for an estimate on planting a few trees and bushes.  But after taking a few hours personal time from work to meet him between 3:00 – 4:00 PM, a quick apology and an offer to reschedule does not in any way recognize the fact that my time should be just as important as theirs and any other customer they purport to serve.

The only thing that prevented those few hours being a complete waste of my time was that the lawn needed cutting anyway.

I already had trouble with two previous trees from Holly Days.  Both were purchased at the nursery, but planted by another landscaper.  I do not necessarily blame the nursery for both losses; but simply chalk them up as further indication that for whatever reason our relationship was not destined to be fruitful.

In an area where high-quality nurseries are easy to find, one would think competitive pressures would ensure a faithful adherence to the appointment schedule … or perhaps the drive to work a longer day when commitments are missed … or maybe a bit more than a “Sorry, I couldn’t get there. Let’s reschedule.”

The kicker was his response to my complaint of already having wasted 3 hours of personal time.  “Well, do you have to be there?”

Yeah … I do “need to be there”.  But you certainly don’t!

Random thoughts for Primary drowsiness

Slow, slow, slow today at the polls …

Saw an interesting blog post from The Philadelphia Inquirer’s Editorial Board that lauds Pennsylvania Governor Tom Corbett for adding 100,000 jobs in the State since January 2011!  It’s a powerful statement for no other reason than it comes from The Inqy’s Editorial Board …

* * * * * *

Just voted and I was #34 at our polling location.  We might be up to 40 now.

Have I mentioned how slow Primary Days are?

* * * * * *

In our little slice of Horsham heaven I note that the Philadelphia labor and trade unions are nowhere to be found.  The unions have a history for sending union outsiders here to “work” Horsham’s polls as Democrat “volunteers”. Given the almost uniquely Democrat event today’s primary is, it’s obvious the Unions are sitting this one out.

* * * * * *

Geez … Is it really only noon?!?

 

A Primary plan

primary-electionPrimary days … I hate them.

Off year elections can at least be interesting.  The upcoming November ballot will be much more intriguing with Pennsylvania Governor and mid-term Congressional elections to be decided.

That one will be fun.

Primary elections?  bleah …

As a Republican committee representative, it’s always a long day at the polls.  What makes it most interesting however, when the political conditions are right, are the interactions and discussions you can have.  People who make sure they get out to vote are those most likely to be keeping abreast of the political news.

The greater the interest, the more voters show up, the better the day …

Tomorrow, with only one significant Republican race (PA 13th Congressional District) in my district (Horsham 1-3) and a slate of State Republican committee nominees to select, there’s not a lot of sexiness to attract much attention.  I guess I’ll pass the day baiting what Democrats turn out for their primaries for Governor and the PA 13th, which is like trying to pick The Golden Ticket out of a bag of lemons.

For those waiting patiently for my PA 13th Congressional Republican endorsement, you won’t find one.  I am disappointed in what little I have heard – which is nothing – from Beverly Plosa-BowserDee Adcock put me to sleep in 2010.  To win the 13th, you must have the connection and the energy to make inroads into the Northeast Philly chunk of the district.  Neither has convinced me they will have what it takes, so let the voters decide!

I will be at the Horsham firehouse on Meetinghouse Road for most of the day tomorrow.  Stop in and keep me from falling asleep!