After just one year in office it is clear Pennsylvania Governor Tom Wolf is the most spendthrift governor in the nation. After all, his proposed and still unresolved 2015-16 state budget called for a tax hike greater than that of all other 49 states combined. It was a bit startling to see this ultra-big government advocate actually announce he was going to shutter a state agency.
You might think fiscal conservatives would applaud his move to close the Public Employees Retirement Commission (PERC) an obscure state agency that most Pennsylvanians don’t know even exists. But, any time a politician acts out of character it is a good idea to dig deeper into his or her motives. Such is the case with Governor Wolf’s proposed elimination of PERC.
According to its website, the Public Employees Retirement Commission is responsible for “monitoring public retirement plans in Pennsylvania, studying the retirement needs of public employees … develop objectives and recommend legislation to the Pennsylvania legislature.” PERC further administers various mandated reporting on the health of public employee pensions and funnels state funding to municipal pension systems throughout the state.
This trip takes us through the tall weeds of Pennsylvania’s arcane and convoluted public employee pension system, but the bottom line is PERC is responsible for monitoring the health of municipal pension systems and in the process of performing that duty raises a red flag when such plans are headed into financial trouble. As such it performs an important watchdog function especially at a time when a significant number of municipal pension systems, especially in cities, are under fiscal stress.
In addition to providing independent oversight of municipal pension systems, PERC is required to administer the process of distributing some $250 million annually to municipalities. According to a news release from State Representatives Stephen Bloom, Seth Grove and Keith Greiner, that amounts to 20% of the contributions that are made annually to municipal pension funds. The representatives, Republicans all, voiced concern that without those funds many municipalities would be forced to raise property taxes.
Concern over the potential demise of PERC has produced something rare in Harrisburg, bi-partisan agreement. State Auditor General Eugene DePasquale, a Democrat, said: “If people think there’s a (municipal) pension problem now, wait until municipalities don’t get their (Act 205) payments.” That DePasquale, who has been one of the more rational voices on fiscal matters would sound such a warning speaks to the seriousness of the issue.
To complicate matters further Governor Wolf plans to shut down PERC without seeking legislative approval. Using the “pen and phone” approach popularized by President Obama, the governor says the agency is simply going to cease to exist. Republican lawmakers are crying foul pointing out the governor has no authority to close an agency authorized by an act of the General Assembly. So not only does Governor Wolf’s plan to sunset PERC put public pension plans at risk and likely trigger municipal tax increases, but it creates a constitutional crisis as well.
Pension reform has been a major component of the ongoing budget battle between Governor Wolf and the Republican-controlled legislature. Senate Majority Leader Jake Corman, among others, has vowed not to consider any of the governor’s proposed broad-based tax hikes until the state’s pension crisis is resolved. Why then would Wolf want to complicate matters by tossing PERC under the bus?
Perhaps because Governor Wolf simply refuses to admit there actually is a pension crisis. In his view, pension systems across Penn’s Woods are just fine – all they need is more money. As a captive of big labor the governor is committed to blocking any and all attempts at pension reform instead favoring throwing billions more in taxpayer dollars into systems at all levels that are simply no longer viable.
While many municipal pension funds, especially those administered by townships, are financially secure, state employee funds and those in larger cities must either be reformed or taxpayers will see historic tax increases. That Governor Wolf would open a new front in the pension battle by moving to shutter PERC shows not only is he not serious about pension reform, but he will do everything in his power to prevent it from happening.
(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address islhenry@lincolninstitute.org.)
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