PA House Panel OKs Public Benefits Hike

May 5, 2008 ( - A Pennsylvania state House committee has approved a measure increasing pension benefits for 250,000 state government and public school retirees that is projected to carry a multibillion-dollar price tag.

The Associated Press reported that the State Government Committee voted unanimously to send to the House floor a bill providing increases ranging from about 2.7% for the most recently retired to 25% for those who retired before July 1990. The benefit hikes carry an estimated cost of $10.4 billion over 20 years.

To be eligible, workers must have retired before July 2, 2007, and be receiving benefits by July 1 of this year. According to the news report, election-year pressure is mounting on lawmakers to put through a benefits increase, fueled by reports that the Keystone State’s two public-sector retirement plans have reaped strong investment returns in recent years.

“What’s a better economic stimulus package than to give your former state employees a cost-of-living increase, which they’re going to spend right here in Pennsylvania?” said Nelson McCormick, president of the 18,000-member Pennsylvania Association of Retired State Employees, according to the Associated Press. The Pennsylvania School Boards Association opposes the bill and warned of its cost.

Representative Matt Baker, a key backer of the measure, said he and other lawmakers have heard from state retirees about their need for financial relief. “The cost of living over six years has gone up tremendously for a lot of these retirees living on fixed incomes,” Baker said in the news report.

The last cost-of-living increase was in 2002, one year after passage of the so-called “pension grab” bill that boosted benefits by 25% for most workers and by 50%t for most state lawmakers.

The Public School Employees’ Retirement System would need an estimated $348 million a year for 20 years under the bill, according to a preliminary analysis Baker provided.

The higher pensions would cost the State Employees’ Retirement System an estimated $174 million annually for 20 years. The cost would be funded by a state government subsidy and by local school taxes, the news report said.

A spokesman said Governor Edward Rendell will not endorse the legislation unless its supporters convince him they can raise the billions of dollars it requires.