Like other states, Pennsylvania is staring at a public pension debt that raises alarm bells.
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Pennsylvania did pass a pension reform bill in 2017, a fact cited by incumbent Gov. Tom Wolf recently during the lone gubernatorial debate of this election cycle, but Republican challenger Scott Wagner argued that the reform, while well-intentioned, was hardly sufficient.
According to good government group Truth in Accounting, Wagner may be more right than he knows, and in fact the size of the state’s public pension and retiree health care debt may be larger than the state itself has acknowledged. That’s according to a recent report, “The Financial State of the States,” which assigns Pennsylvania a “D” grade and identifies $82.1 billion in unfunded debts.
Truth in Accounting said the debt works out to $18,800 for each taxpayer, an increase from the $8,200 per capita debt the group calculated for 2009.
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“Pennsylvania’s financial condition is not only alarming but also misleading as government officials have failed to disclose significant amounts of retirement debt on the commonwealth’s balance sheet,” the TIA report says. “Residents and taxpayers have been presented with an unreliable and inaccurate accounting of their government’s finances.”
TIA’s CEO and founder, Sheila Weinberg, and state Rep. Seth Grove, R-York, each told Watchdog.org in separate interviews that new federal accounting rules will soon eliminate the reporting problem when it comes to public pension and retiree health care debt. But either way, that debt is looming.
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“in 2015 … state and local governments finally had to start putting their pension liability on the face of their balance sheets,” Weinberg said. “But they are not required to put the majority of their retiree health care liabilities on their balance sheets. Next year, they’ll be required to do that. But they’re still hiding some of those liabilities.”
Grove said that the sheer size of Pennsylvania’s debt, even in light of the recent reforms, threatens to create a “financial death spiral.”
‘I look at failed entities, whether it’s a private business, or it’s an individual, or it’s a government, it always starts with their debt,’ he said. “So they’ll ring up debt, and then their debt payments pull money out of their operational fund, and then they can’t pay their bills. … Pennsylvania is moving that direction. We’ve got to tighten the belt, we’ve got to stop using borrowing as a revenue source, and continue working on pensions.”
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State Rep. Pamela DeLissio, D-Philadelphia, told Watchdog.org that the failure of the 2017 reform to really tackle the pension debt was at least partly the fault of the Republican majority in the Legislature.
“The majority party led General Assembly put forth [Senate Bill 1] in 2017 (now Act 5) that was labeled as pension reform, and the discussion on funding the existing liability was deferred,” she said. “The reform will aid in ensuring that the unfunded liability will not grow in future years and will also spread risk in future years. Act 120 of 2010, as I understand it, remains on track to reduce the unfunded liability over the projected 20 some years.”
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Grove said that the flaws of SB1 were the result of Gov. Wolf’s failure to properly grapple with the scope of the pension crisis, and that the legislation put forth by Republican leadership was the best they could hope for given the reluctance they were facing from the administration.
“I think the pension bill we passed was as good as we’re going to get from a governor who, when he started in office … said we didn’t have a pension problem,” he said. “It took a lot of work to get him to the point where – and I think it was mostly that he just didn’t want to deal with it anymore, versus whether he actually thought there was a pension problem in Pennsylvania. But we were able to get some reform through.”
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