State pension obligations can be crushing. But corporate welfare costs more.

30 Jan

When Louise Jordan walked through the doors of Abraham Lincoln High School in North Philadelphia 34 years ago, after landing her dream job as a special education teacher right out of college, she didn\’t worry about her tiny salary — just $10,770 per year back then. It wasn\’t a lot to live on, but if she kept contributing 7.5 percent of every paycheck into Pennsylvania\’s pension fund, the state would support her when the time came to retire.

\”The expectation was crystal clear,\” Jordan says. \”You kind of took for granted that the state would fulfill its obligation.\” For a teacher with a long career of service, the funding formula would have allowed her to essentially keep receiving the equivalent of a middle-class income through retirement.

So she bought a house in nearby Jamison, Pa., which she\’s still paying off, while putting a kid through college. Now 56 years old, she\’s risen to become Lincoln High\’s special ed program coordinator, making $82,000 a year. But that retirement promise? Potentially dashed, with Pennsylvania Gov. Tom Corbett on a mission to roll all new public employees into 401(k) plans, and tweak the formula such that the current defined-benefit pensions pay out less.

\”We\’re so afraid,\” Jamison says. \”We\’re not getting people to fill our vacancies now, because of the uncertainty. We have so many young people, and they\’re worried, is this a place where they should work?\”

Here\’s what happened in between: When the pension system\’s investment portfolio grew bloated in the go-go 1990s, the state increased benefit levels, without increasing the amount either employees or the government paid into the fund. After those investments collapsed, the accounts were drained, increasing the contribution necessary every year just to keep the fund solvent.

If you just look at the steeply climbing trajectory of Pennsylvania\’s pension costs, it does appear that some sort of drastic action is necessary — and with all other budgets squeezed to the bone, perhaps public employees should be asked to pay for the miscalculations of politicians past.

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via State pension obligations can be crushing. But corporate welfare costs more..

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