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PA Senator Mike Folmer on our pension crisis

Pennsylvania’s Pension Crises

by Mike Folmer, PA State Senator

August 21, 2014

President Kennedy said: “There are risks and costs to action. But they are far less than the long range risks of comfortable inaction.”

Pennsylvania’s failure to address its public pension problems recently resulted in another downgrade of its bond rating: from Aa2 to Aa3. According to the rating agency Moody’s, “. . . the expectation that large and growing pension liabilities coupled with modest economic growth will limit Pennsylvania’s ability to regain structural balance in the near term.”

Consider where Pennsylvania’s Public School Employees’ Retirement System (PSERS) was prior to 2001 changes enhancing benefits: $9.5 Billion surplus and a 123.8% funded ratio (100% is an appropriate ratio). Using the most recent actuarial valuations, the funded ratio for the State Employees’ Retirement System (SERS) and PSERS (using an optimistic 7.5% annual asset return assumption) was 59.2% and 63.8% respectively. Further declines are expected.

Pennsylvania’s private sector has predictable and affordable pension costs while providing employees with competitive retirement benefit packages. Over 70% of these firms have defined contribution plans for new hires with average employer costs ranging from 4% to 7% of payroll. (All private sector defined benefit plans must eliminate any deficits over time – often as short as seven years).

Ignoring such facts has resulted in unsustainable plans in states from New Jersey to California. Cities like Chicago and Detroit face bankruptcy because of public pension costs.

Courts have said public pension benefits once earned are protected by Pennsylvania’s Constitution: Article I, Section 17, “Impairment of Contracts.”

I’m not part of the legislative pension system as I believe Article II, Section 8 of Pennsylvania’s Constitution doesn’t provide for elected officials’ pensions: “The members of the General Assembly shall receive such salary and mileage for regular and special sessions as shall be fixed by law, and no other compensation whatever, whether for service upon committee or otherwise.”

This same provision is why I also return my legislative cost of living adjustment: “No member of either House shall during the term for which he may have been elected, receive any increase of salary, or mileage, under any law passed during such term.”

Nonetheless, I’m regularly asked why Pennsylvania underfunds its public pension plans. Taxpayers fear proper funding policies will result in districts increasing property taxes to pay pension contributions. Schools say the alternative is cutting programs or increasing class sizes.

Failure to contribute at least the actuarially recommended contribution transfers ever-mounting debt to future generations. The combined liabilities of SERS and the PSERS are over $50 Billion – and growing. These costs are the fastest growing state budget line item.

Separate from proper plan funding are new GASB (Government Accounting Standards Board) accounting and reporting standards to assess current and future pension obligations. Unfunded liabilities will now be reflected on school districts’ balance sheets and the underfunding issue will be further highlighted. Increasing numbers of municipal and school audits will be flagged due to GASB 67 (“Financial Reporting for Pension Plans”) and GASB 68 (“Accounting and Financial Reporting for Pensions”) standards.

In 2009, legislation (which I opposed) was enacted attempting to address Philadelphia’s public pension problems: a temporary 1% Sales and Use Tax increase. This “temporary” tax was subsequently extended. Purchases in Philadelphia include an 8% Sales Tax. However, Philadelphia’s pension liabilities have continued to grow. Like Pennsylvania’s infamous “temporary” 1936 Johnstown Flood Tax, this tax continues to exist and continues to grow. Ironically, Philadelphia is being flooded with pension liabilities.

In 2010, another law was passed to address Pennsylvania’s pension issues. Act 120 made some benefit changes for new employees, including: raising the vesting period to 10 years from five, reducing the multiplier to calculate retirement benefits (to 2.0% from 2.5%), increasing the retirement age for new employees to age 65, eliminating lump sum payouts of employees’ contributions and interest upon retirement, and limiting maximum retirement benefits to 100% of final actual salary.

But, Act 120 also continued the practice of underfunding, which further deferred state and local pension contributions to future years through “collars:” below recommended actuarial levels, which reduce public pension funding by about $1 Billion to $2 Billion annually. Such sustained underfunding has resulted in numerous credit downgrades. This is why I also opposed this measure.

Supporters of the status quo urge the General Assembly to allow Act 120 “time to work.” However, since passage of Act 120, pension liabilities have grown to $50 Billion from $41 Billion; the original assumptions of Act 120 have shown Act 120 has failed to attain its goals.

This $50 Billion deficit is growing by over $10 Million a day – over $3 Billion a year. Meanwhile, the Commonwealth, municipalities, and schools are allowed by law to underfund these plans by about $1 Billion to $2 Billion a year. Every 0.5% reduction in SERS and PSERS assumed investment returns adds approximately $7 Billion to their combined unfunded liabilities. If PSERS would compute its unfunded liability using market value of assets, this change alone would immediately add about $8 Billion to the deficit.

Failure to both properly fund these plans or move new hires to a defined contribution plan will only make matters worse (the claims of unaffordable transition costs are vastly overstated). Taxpayers should fear higher taxes to continue to fund public pensions. Public employees should fear their continued solvency.

There is a cost for inaction.

Ken Matthews, local reporter extraordinaire

WHP580 AM radio has long been a source of news for those hungry for accurate reporting outside of the establishment media liberal agenda.

Bob Durgin was the lovable, garrulous, crotchety, cowboy hat wearing local man-on-the-street news guy from 3:00 to 6:00 daily, and his news items shaped a good deal of local, regional, and state politics.  Because Durgin worked in the state capital region, he was listened to by a population of political activists.  So when the PA state legislature midnight pay raise happened, Durgin was on the soap box, giving vent to his frustration.  He inspired an entire movement and generation of political activists; existing activists like Gene Stilp, Russ Diamond, and Eric Epstein were bolstered by having weekly access to his show as guests, and often sitting in for Durgin when he went on vacation.

After Durgin retired, Ken Matthews was hired by RJ Harris to run the 3-6 slot.

Honestly, I wasn’t sure if Ken was going to make it during his first couple of months at the microphone.  His listeners missed Durgin’s style, and they missed Durgin’s local content.  It is a tough place to be, following three hours of Rush Limbaugh, and the natural inclination is to talk about national and international issues.  After all, these big issues best reflect the great principles and ideas that guide government, both good and bad.

So Ken’s callers were hostile towards him.  They didn’t like his style, his voice, or his views.  It was a rough transition, and it came through the radio like a sharp thumb in the eye.

But to Ken’s credit, he dove into the Central PA culture and took a crash course in our ways and our people.  There is a reason that this region is the most politically and culturally conservative area in America.  Our people here will always fight the good fight, and they want to be knowledgeable about politics.

Ken Matthews has now mastered the audience’s interests and passions, and he has really hit his stride.  Last week Ken reported on the frivolous but dangerous lawsuit against Perry County Sheriff Nace, by liberal county auditors seeking concealed carry permit holders’ information. Did the Patriot News report on it up front? No.  But, surprisingly, that liberal activist newspaper had an incredible interview with citizen activist Jim Lucas, after the fact.  So Ken is having an impact.

Ken’s reporting awakened a sleeping giant in otherwise pastoral, tranquil Perry County.  Ken is a hero.

Perry County’s tranquility is often seen as being simple and backwards by outsiders.  As a guy who grew up in very rural farm country, I can tell you that the outward tranquility masks a soul of steel and resolute commitment to American liberties.  City slickers do not understand that.  Here comes the political surprise, folks!  The hornet’s nest was knocked down with a broom handle, kicked, and then a swarm of angry hornets poured forth.  The implications for the 2016 state senate race in the 15th PA senate district are huge.  Perry County voters are now riled up.

Thank you to Ken Matthews, a friend of our Second Amendment rights, and a fantastic local reporter.  We are pleased to have you wearing Bob Durgin’s big cowboy boots.

Historic win in York, Pa

Tonight, candidate Scott Wagner beat all the odds and won a contrived special election by write-in. The Pa-28th state senate district is in his hands.

As I’ve experienced myself, when your own party decides you’ve served enough of a purpose, or not enough, the people you were loyal to can try to dump you overboard. Such happened to Scott.

But tonight, Scott bested both the Democrats and the Republican establishment. It’s a historic win by any standard, especially by write-in.  Congratulations to Scott Wagner and to his campaign manager Ryan Shafik.

Freedom of opportunity reigns.

York County senate race is a sad state of affairs

Scott Wagner is an upstart York County businessman who wants to be elected to the PA state senate. He’s not a fan of the Republican establishment, and they’re no fan of him.

What Wagner has done to attract the negative radio ads the PA Republican Senate Election Committee is running against him, is anyone’s guess. His political independence is most likely the great crime.

Voters overwhelmingly embrace independent minded candidates. Free of special interests, or of tepid blah political stances designed to offend no one, candidates like Wagner are a threat to a plain vanilla political orthodoxy that often stands for basic business issues and not a lot else.  Candidates like Wagner have the potential to propose and support strong laws that threaten to upset the delicate balance of power the establishment has cultivated with Big Labor, Mainstream Media, etc.

Wagner is a breath of fresh air, necessarily running against his own political party because his party is afraid of him. Very sad state of affairs. And an indication that political parties often have their own interests well beyond those interests of the party members.

Senate ceding its role to president: Chaos

The US Senate has recently changed rules that have helped maintain America’s checks-and-balances system of government for over 150 years.

In the interest of bolstering the executive branch’s incredible reaches for off-limits power, the senate has ceded its role as being a legislative check.  The senate is now an adjunct of the executive branch.

Recent senate rules change allowed radical, far out of the mainstream federal judges to be confirmed.  They in turn go on to help the executive branch implement its unconstitutional actions.

Assuming we get through this crisis without a civil war, what happens if a new president is elected from the other party, and he or she wants to correct the damage done to America, liberty, and democracy over the past five years? When that president employs the same exact methods, will the current party cede the field, acknowledge that politics is a two-way street, and relinquish their rights?

No, they won’t.  They will fight like hell, use their media allies to bolster them in the public eye, and accuse the new party in power of all kinds of contraventions.  Hypocrisy? Yes.  It is the norm in politics, apparently.

If amnesty is granted to 8-10 million illegal immigrants, and they become voters, then the two-party system is over.  America will become artificially dominated by a single party bent on controlling the citizenry through gun confiscation, NSA spying, and more onerous socialism designed to end our capitalistic system.

I, for one, will go down fighting, if necessary.  I hope you, too, will join your liberty-loving fellow citizens and either prevent the country from descending into chaos through successful political work, or prepare to meet that chaos in an organized way.

It’s official: Sunday hunting in VA

Two weeks ago the Virginia state House passed a Sunday hunting bill out of a committee that had bottled up similar bills for decades before. It was a surprising statement that it actually got through committee.  Then it passed the full state House, which surprised even its most ardent sponsors.

Well, today the Virginia state Senate passed the companion bill.  It allows hunting on private land on Sunday, a private property rights win if there ever was one. If you pay property taxes, say on a remote mountainside property, and you are deprived of 14.2% of your full use of that property for some vague reason, you might get frustrated.  It is your property.  You can shoot 1,000 bullets at a target on Sunday, but you cannot shoot just one at a squirrel.  Laws like this are by their definition arbitrary, the bane of democracy.

Virginia’s governor says he will sign the bill into law.

Welcome to the modern era, Virginia! We are envious of you.

Kudos to Kathy Davis of PA-based Hunters United for Sunday Hunting (www.huntsunday.org), who has devoted the past two years of her life to this issue, and who helped a great deal with getting the Virginia law passed and the lawsuit filed there.  The lawsuit compelled the state legislature to act, before a judge ruled against the state and the entire state was opened up.  While I would like to see public land open for Sunday hunting, I am satisfied with private land as a start to implementing it state-wide.  This really is an issue of the most basic American rights.

The end of 215 years of American tradition

Early in America’s youth, a rule in the US Senate was established that recognized minority rights.

By setting a higher threshold for confirming federal judges, US senators had a chance to seriously consider judicial candidates, who serve for life and can only be impeached for serious crimes.

Today, the US Senate majority changed that 215-year-old rule, no longer allowing filibusters for extreme candidates. Now, judges will be voted for confirmation by a simple majority.

When the other party had control of the senate, and the present majority engaged in filibusters, it was business as usual. Now, the majority wants absolute control. No forced debate.

Now what happens when this majority is in the minority? Will they whine, moan, and cry about not having the filibuster at hand to stop or slow down judicial nominees they strongly oppose? Probably. And the sense of irony will be ignored.

Their friends in the mainstream press will take their side, and it’s up to us citizen journalists to get the word out about how serious this is.

A political tradition lasting 215 years must have been worthy. Now we see a huge power grab by one party. What will you do about it?

NRA? All the way!

The National Rifle Association has agreed to run the former Eastern Sports and Outdoor Show, now to be called the Great American Outdoor Show.

Dauphin County commissioner Jeff Haste led the effort to find a suitable vendor for the huge PA Farm Show complex. The ESOS has been worth anywhere from $45 million to $88 million annually to the local economy, and losing it was a huge impact on the region.

The fact that yours truly played the key role in blowing the whistle is both happy and sad. I’ve been blamed for ruining the show and praised for calling attention to the former promoter, Reed Exhibitions, and getting them knocked out. Alex Cameron, Jr., was the vendor who tipped me off.

My friend and custom knife maker/supplier is John Johnson, and he took a financial beating because the show wasn’t held. Now he has confidence that the 2014 show will be better than several of the prior ones put together, and he can plan accordingly.

The NRA has invited all five million of its members to visit the 2014 show, so you know it’s going to be crowded, fun, and full of exciting gear and trips. And you can be sure that modern sporting rifles will be present and accounted for, in force….

Thank you to Commissioner Haste, the Corbett Administration, and the NRA for getting the show re-established. And thank you to all of the patriotic Americans who decided to take a hit to stop the British – based Reed Exhibitions this past February.

See you all next February at the Great American Outdoor Show!

UPDATE: As if you haven’t already read this elsewhere, the US Senate voted down the unconstitutional ‘background check’ federal database gun confiscation bill proposed shamefully by senators Manchin (WV) and Toomey (PA). Let’s get these two buffoons out of office post-haste. You cannot be a US senator, attack the US Constitution this way, and then be taken seriously by those of us in favor of maximum freedom for citizens.

A day that will live in infamy? We will live through it

Seeing US Senator Pat Toomey cave in on gun control is a painful thing indeed. The man was elected to lead on tough issues and bring the Constitution to bear on policy and legislation. He is obviously failing on this most important count.

With his Democrat co-sponsored bill promoting universal background checks and hugely increased roles for doctors, and reportedly teachers, in unilaterally determining if a citizen is sufficiently mentally competent to enjoy their Constitutional freedoms, Toomey has entered a freak zone that no one could have imagined.
However, we have been here before. Last year it was US Supreme Court Chief Justice Roberts who allowed ObamaCare to stand on the most bizarre reasoning possible. Recall that, like Toomey, Roberts was supposed to be a conservative.
If you go back far enough in other places, you’ll find similar hard left turns, like when Israel Prime Minister Menachem Begin gave up the Sinai Peninsula for a worthless scrap of paper from Egypt, or when Israel Prime Minster Yitzchak Rabin entered into the disastrous Oslo Accords, or when Israel Prime Minister Ariel Sharon unilaterally disengaged from the Gaza Strip, this time not for a worthless piece of paper, but for a never-ending rain of missiles.
FDR dropped the ball at the Yalta Conference, giving Stalin free rein to run amok, setting the stage for decades of nuclear stand-off that could have been averted had FDR been a strong man.
Such is the mindset of humans, that desire to be liked, to be thought well of. Especially when momentous events are upon them, so many in leadership roles are called upon to compromise as a sign of their maturity and clear thinking.
Yet, few but the strongest can resist this siren’s call. Lincoln comes to mind. Thus he earned the best monument on the National Mall. Principled all the way. Admiration from all corners.
Seeing Senator Pat Toomey’s face in the news associated with this big flop of a bill hurts. Hearing Toomey say that background checks and all of the government database that does with them isn’t gun control is like entering some weird, surreal deep-sleep dreaming phase.
And yet, Toomey has revealed himself as a mere mortal, not some great man who had the principles and the strength of character to stand tall when needed.
He is not a bad guy, but Toomey is a failure on this one count alone, and he is not the first nor the last. The Second Amendment is the greatest right of all the Constitutional rights granted to American citizens, and seeing it so badly eroded by one person who should know better is a painful reminder that we cannot stop working.
Yes, the Tea Party folks will probably primary Toomey, and he may well lose that race on the basis of this vote alone. And yes, that could possibly lead to a Democrat filling his seat, which I would not be happy about. But it will be a lesson to other Republicans: Stand with us, or quit calling yourself a Republican.

It Takes a Democrat Strategist & a Conservative Republican to Say What the GOP Establishment Can’t & Won’t Say

CPAC is going on now and through the weekend. CPAC is the annual conservative gathering held around America that pressures the GOP establishment to make sounds of conservativism.

Political strategist Pat Caddell sat on a panel at CPAC yesterday and chided the Republican Party for not fighting to win. Caddell said that the Democrats fight to win, and win they do, and he laughed at how gentlemanly Republicans and conservatives like to be, even at the cost of winning. He listed many examples that I will not reproduce here.

Caddell is a Democrat.

Slip over to the US Capitol around the same time, where US Senator Dianne Feinstein (D-CA) was being asked simple questions about her view of the US Constitution by US Senator Ted Cruz (R-TX). You can easily look up the exchange. Cruz asked Feinstein if her approach to gutting the Second Amendment would apply to the First and Fourth Amendments to the US Constitution, where, by her kind of legislation the US citizens could be told which books they could read and which parts of their homes were open to warrantless searches.

Feinstein had a snit and “took offense” to the question, instead of answering it. Liberals always, always, always take offense to anything that they don’t agree with. Being offended is silly, and is no grounds for dismissing an issue. If someone is offended, so what…keep going.

Recall that until very recently, Cruz was the outsider Republican, excluded by the GOP establishment and undermined by them at every turn in his quest for elected office. Conservatives like Cruz are always on the outs with the GOP establishment, because they say things that aren’t considered polite by GOP moderates.

In a nutshell, Thursday, March 14, 2013, was a significant milestone in the internal reformation of the GOP. A Democrat laughed openly in the faces of the GOP for being such weenies that they willfully lose races, and a conservative Republican asked a simple question not asked by any establishment R’s, highlighting the gulf between traditional conservatives and moderate Republicans.

Fortunately, Pennsylvania has US Senator Pat Toomey, a real American with basic American values representing our views in Washington. How sad it was and remains today that the PA GOP tried to promote Steve Welch as the GOP alternative to Bob Casey, instead of staying out of the primary race and letting the candidates contend among themselves. We might today have Tom Smith as our second US Senator, instead of the leftwing Bob Casey.