The unfunded liability of Pennsylvania's public pension systems has reached crisis status. As a result of years of underfunding, a retro-active upgrade in benefits and lower than anticipated investment returns, the current combined unfunded liability of the Commonwealth's two public pension systems, the State Employees' Retirement System and the Public School Employees' Retirement System, will balloon to more than $58 billion this year alone. This growing pension debt has led to multiple reductions in the state's credit bond rating and represents the greatest threat to Pennsylvania's fiscal stability.
Before any discussions take place on tax increases to fund greater state spending, lawmakers must first address the mounting pension crisis. As the Commonwealth's pension obligation payments increase each year, more funding is diverted from important programs like basic education, transportation projects and workforce development programs. Currently, more than 60 cents of every new dollar in revenue goes towards the state's pension payments. In the upcoming fiscal year alone, nearly $3 billion from the state's General Fund will be dedicated to pension obligations. Over the next four years, pension costs will increase by nearly $1 billion.
The current system is clearly unsustainable – and will lead to increased tax burdens on the state's residents and employers. That's why the PA Chamber's No. 1 priority is comprehensive, long-term pension reform that will protect the Commonwealth's economic stability and put the public pension systems on a sustainable path going forward.