Budget Secretary Warns Of Financial Crisis
PITTSBURGH (KDKA) — The Keystone Pension Report issued by Budget Secretary Charles Zogby warns of a costly crisis in the state’s two pension systems covering public school employees and all state employees.
The unfunded liability is a staggering $41 billion — or $8,000 per household.
“That’s a huge amount of money to try to make up,” Patrick Sable, chief financial officer for the Allegheny Intermediate Unit, told KDKA Money’s Jon Delano.
In 2001, the legislature raised retirement benefits by 25 percent without paying for them, hoping investments in the stock market would make up the difference.
But 9/11 and the recession changed that.
“In fact, we are upside down because of those two events,” noted Sable.
To make up the losses, current state law requires increased contributions from state government and local school districts
Sable, a former school district financial administrator, says pension rates for school districts will increase 400 percent by 2019.
“School districts won’t be able to survive and pay half of that rate,” he said.
And while school districts could raise taxes, most will not, forced instead to cut programs.
“The discretionary programs will be on the chopping block — all the arts, all the athletics, all the non-mandated required programs,” he said.
And that will leave most school districts without football, bands or school plays.
This pension report from Budget Secretary Zogby is only the first step.
Gov. Corbett is expected to issue his recommendations as part of his 2013 budget early next year.
Then it will be up to the state legislature to figure a way out of this mess without raising your taxes.