Analysis: Gov. Wolf Vetoes Pension Bill, Republicans Express Dismay, Budget Jabs Continue

As threatened, Gov. Tom Wolf Thursday vetoed the Republican pension reform bill-- Senate Bill 1 (Corman-R-Centre).  The Republican reaction?  They were “dismayed.”

Now, we know a lot of people aren’t paying that close attention to the shots Gov. Wolf and Senate and House Republicans are taking at each other over the budget, but really, dismayed?  Everyone saw the veto coming didn’t they.

Of course Wolf also said this week the GOP budget made him “sad” for public education.
The Senate announced this week they will return to voting session July 13, 14 and 15.  The House will return July 21 and 22.  For what, given events, no one is sure.

Gov. Wolf said of his veto: “I understand the need for pension reform, but this legislation provides no immediate cost savings to taxpayers and does not maximize long-term savings for taxpayers. We need pension reform that works. There are provisions within this legislation, which as part of a comprehensive pension proposal I could support; however, Senate Bill 1 does not address the problems facing our pension system comprehensively and fairly.

“The plan I delivered to the General Assembly would save at least $10 billion, while at the same time ensuring that the commonwealth will make all actuarially required contributions to fund our future pension obligations and reducing the burden placed on the commonwealth and school districts in the short term. Since my budget proposal I have found and shared an added $7 billion in savings, a total of $17 billion in savings to our retirement systems, which I have communicated to the General Assembly. Furthermore, the plan I proposed would reduce the over $700 million in fees paid annually to Wall Street firms to manage our investments, Senate Bill 1 does not address these excessive fees.

“This legislation was pushed through without negotiation by Republicans along with an unbalanced budget, and this legislation produces no savings to our deficit in the next fiscal year. We need a comprehensive agreement on the issues facing Pennsylvania including education funding, the need for a commonsense severance tax on natural gas, balancing our budget for the long term, and pension reform.

“Furthermore, during my consideration of this legislation, it became clear that this legislation violates federal tax law as it would be considered an impermissible cash or deferred arrangement (CODA). In addition, the bill forces newly-hired employees to pay down the unfunded liability of existing pension plans, caused by years of government failure to make necessary payments, while denying those new employees the full benefit of their contributions.

“I urge the General Assembly to resume negotiations and work to enact a comprehensive plan that will balance our budget, invest in our schools, make oil and gas companies pay their fair share, and solve Pennsylvania’s pension problem.”

Republican Reaction

Senate President Pro Tempore Joe Scarnati (R-Jefferson), Senate Majority Leader Jake Corman (R-Centre), Senate Appropriations Committee Chairman Pat Browne (R-Lehigh), Speaker of the House Mike Turzai (R-Allegheny), House Majority Leader Dave Reed (R-Indiana) and House Appropriations Committee Chairman Bill Adolph (R-Delaware) said of Wolf’s veto:

“We are dismayed by Gov. Wolf’s comments on KQV radio today stating that he will veto the pension reform package because ‘it’s still not good for employees moving forward…we’re not going to attract good employees to our system with that part of the pension bill.’ Further, the notion that we are close to a compromise on a pension reform plan, when we only learned this morning of the veto via the press, is a bit disingenuous.

“It is remarkable that Gov. Wolf would oppose a proposal to move new public employees into a 401k-style retirement plan which he, himself, adopted for his employees at Wolf Organization. Apparently, the Governor believes this type of plan, which is common in the private sector, is adequate for most hard working Pennsylvanians, but not for legislators or members of public employee unions.

“With this planned veto, he is rejecting tangible, systematic changes to reform the public employee pension systems, which are currently the number one reason for property tax increases. Gov. Wolf’s plan to borrow to pay pensions does not fix the problem. We have clearly seen that Gov. Wolf’s actions speak louder than his words on wanting to provide property tax relief.

“We are unsettled by his continued willingness to bow to the desires of special interests while disregarding what the people of Pennsylvania recognize as needed reform. The reality is that with this veto, Gov. Wolf will be taking another step to ensure Pennsylvanians pay significantly higher taxes, in order to fund an outdated retirement system which is out of step with what average Pennsylvanians receive.

“In the last 10 days the Governor has vetoed a balanced, no-tax-increase budget; an historic liquor privatization plan to finally give consumers convenience and choice when purchasing alcohol; and now today has said he will veto a pension reform bill that would save taxpayers over $10 billion. Instead of working with the General Assembly to move Pennsylvania forward, Gov. Wolf continues to be fixated on massive income and sales tax increases. For someone who has pledged to create a ‘government that works,’ he’s certainly doing everything he can to make sure it doesn’t.”

When Will Budget Pain Start?

Both Gov. Wolf and Republicans were largely talking passed each other for the second  week in a row on budget issues, as you can tell from the NewsClips.  The quips and jabs could go on forever, but soon real pain will set in for groups and local governments that depend on state funding to provide services.

Vendors the state owes money, including for basic things like rents on buildings, telephone and other services, non-profit groups that provide a variety of social services, drug and alcohol treatment and rehab, mental health-related services, nursing homes, payments for environmental grants and many others are feeling the immediate impact because no payments were made after June 30.

The first payments to school districts are due in August through October.

While state worker pay (including the Governor), welfare payments and legislative member and staff pay (at least for a while), will not be affected, it could become difficult to explain why legislators and the Governor continue to get paid, while the budget crisis continues.

One of the longest periods without a state budget was in 2003 when Gov. Rendell selectively vetoed school district and other funding, to force Senate and House Republicans to deal on the budget.  A complete budget was not passed that year until December 23.

The budget was late each year thereafter in the Rendell Administration because of disagreements with the Republican Senate and House.

With respect to the public’s reaction to all this, perhaps the public will at some point “dismayed” at this whole “sad” budget situation, but it may take a while.