HARRISBURG, Pa. (WHTM) – A Pennsylvania lawmaker who has long warned of growing debt in the state’s two largest public pension systems says legislation sent to Gov. Tom Wolf this week could worsen the crisis.
Rep. John McGinnis (R-Blair) said Senate Bill 1 fails to adequately address the unfunded liabilities of the State Employees’ Retirement System and the Public School Employees’ Retirement System, which currently stand at more than $70 billion.
Senate Bill 1, sent to the governor after the House approved it on Thursday, would require new state or school district employees hired in 2019 or later to participate in one of three new pension plans. Each plan would offer a defined contribution component, similar to a 401(k) plan.
The bill does not affect retired employees and exempts state police, corrections officers, and other law enforcement. Current employees may opt in to a new plan or continue in their existing plan.
McGinnis has supported a 401(k)-style retirement plan for new school and state hires, but he says the state also needs a 20-year plan to pay off the pension debt. He said the legislature’s solution to the problem is to let it ride and get more massive.
“We continue to think that by changing the design of retirement plans for future employees, we are somehow going to see the unfunded liabilities disappear,” he said in a statement.
McGinnis has a PhD in finance from Penn State and is a former associate professor of finance at Penn State Altoona. He is also a certified financial planner.
He predicted additional downgrades for Pennsylvania’s credit rating in the near future.
“The credit rating agencies have been pretty clear that what concerns them is proper funding and proper management of liabilities, and there is nothing in Senate Bill 1 to stop things from getting worse in Pennsylvania,” he said.