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PA Pension Crisis In recent Pennsylvania history and politics, the Pension Crisis is a controversial and debated issue. The Pension Crisis refers to the billion of dollars in “unfunded accrued liabilities carried by the state’s two large pensions funds: the $51.7 billion Public School Employees’ Retirement System (PSERS) and the $27.3 billion State Employees’ Retirement System (SERS)” (LancasterOnline, 2015). In February 2014, the Department of Auditor General published a special report on government pension plans that detailed the funding challenges faced by various Pennsylvania’s local governments (Municipal Pension Report, Department of the Auditor General, January 2015). The report asserted that five hundred and seventy-three local municipalities administering pension plans were distressed and drastically underfunded. This report also noted that these funding issues posed a total liability to taxpayers of $6.7 billion. (Municipal Pension Report, Department of the Auditor General, January 2015). In a 2015 study done by the National Association of State Retirement Administrators, it was noted that Pennsylvania has “the second most underfunded pension plan in the United States” (Alexandersen, Penn Live, 2015). Within the Municipal Pension Report, the actuarial data was compiled from January 2011 reports proposed to the Public Employee Retirement Commission (PERC). Within an article electronically published on The Morning Call, local, municipal pensions in Pennsylvania faced a combined $7.7 billion in debt in early 2015 (Esack and Opilo, The Morning Call, 2015). Carrying a total number of 7.7 billion dollars of debt, municipal pensions placed cities, boroughs, and townships in a difficult financial situation. Across the state of Pennsylvania, these municipal pensions had the possibility of putting cities, boroughs, and townships into bankruptcy across the state (Esack and Opilo, The Morning Call, 2015). Although the combined debt of the municipals were not as hefty as the $50 billion dollars in debt that pension plans for teachers and educators carried, there still remained the issue for state officials on how to fix the debt caused by the pension plans (Esack and Opilo, The Morning Call, 2015). According to The Morning Call article, the proposed plans based on a rising stock market to fix the debt would not be sufficient enough, because there was more retirees receiving benefits than the active workers within the municipals. Throughout the last few years, there have been many bills proposed and initiatives taken to tackle the pension plans’ debt in our state. Many of the legislators and activists behind such bills and initiatives sought to first explain why these substantial debts existed. Studies conducted by institutes such as The Center for Rural Pennsylvania show that there is a huge discrepancy that makes the Pension Crisis extremely large scale in our state. Within a report published by The Center for Rural Pennsylvania, the researchers examined Pennsylvania’s rural and urban municipal pension plans and trends in pension data over a ten year period from 2001 to 2011 (Handy, Nikolic, and Weber. The Center for Rural Pennsylvania. 2014.). Overall, the research found that urban municipal pension plans rather than rural municipal pension plans tended to have unfunded liability over the study period. The trends in the data indicate that urban municipalities have had pension plans with unfunded liabilities since 2001 and that the liabilities have increased over time, especially in the final years of the study, like 2009. Despite the upswing in the market from 2010 to 2011, the urban plans’ unfunded liability continued to increase (Handy, Nikolic, and Weber. The Center for Rural Pennsylvania. 2014.). This indicates that urban municipal pension plans may not be underfunded due to the downturn in the market, but instead may have systematic structural issues within the plans. There needs to be a substantial breakdown and examination of the two largest pension plans to better understand the ongoing Pension Crisis throughout our state. This paper examines the structure, history, and funding of Pennsylvania’s two largest public pension plans: the Public School Employees’ Retirement System (PSERS) and the State Employees’ Retirement System (SERS). Despite having assets of more than $75 billion dollars, the two plans may be underfunded by as much as $100 billion. This problem exists because the current stock of assets in both plans, even when considering future investment returns, is grossly insufficient to pay the retirement benefits that have already been earned by workers across the state. In a 2014 article electronically published on The Mercury News, the funding situation of the pension plans was described as a “time bomb” (The Mercury, 2014). In many ways, the situation seemed to be a ticking time bomb. If the Pension Crisis would be resolved by state officials, funding to support the current workers will run out and not be able to adequately support future generations during their retirement. Even as late as 2017 and 2018, the pension crisis was--and continues to be--a topic of controversy (Hanna, The Morning Call, 2017). By examining the structural breakdown of the Pension Crisis, we can understand the origins of the crisis and build a roadmap for the future betterment of our state in future financial crises.

Works Cited: Municipal Pension Report, Department of the Auditor General, January 2015, http://www.paauditor.gov/Media/Default/Reports/Updated%20Municipal%20pension%20special%20report_01142015_FINAL.pdf “Answers to 6 Questions about Pennsylvania's Pension Crisis.” LancasterOnline, 4 June 2015, lancasteronline.com/answers-to-questons-about-pennsylvania-s-pension-crisis/article_ceaf7d12-0b0a-11e5-9936-6b3d1a206df8.html. “Hybrid Pension Plan Could Save Future Billions for Pa., Doesn’t Touch Current Shortfall.” The Mercury, 2014, www.pottsmerc.com/article/DL/20140605/NEWS/140609791. Alexandersen, Christian. “Pennsylvania's Pension Plan Is Second-Most Underfunded in the U.S., Study Says.” PennLive.com, 12 Mar. 2015, www.pennlive.com/politics/index.ssf/2015/03/pennsylvanias_pension_plan_is.html. Esack, Steve, and Emily Opilo. “Municipal Pensions in Pennsylvania Facing Combined $7.7 Billion Debt.” Themorningcall.com, The Morning Call, 15 Jan. 2015, www.mcall.com/news/local/mc-pa-municipal-pension-crisis-20150114-story.html. Handy, Sheila A., Nikolic, Nemanja, and Weber, Jeffrey. “Status of Pennsylvania’s Municipal Pensions.” The Center for Rural Pennsylvania. July 2014. http://www.rural.palegislature.us/documents/reports/Municpal_Pensions_2014.pdf Hanna, Maddie. “Pa.'s Top Pension Earners Take Home Hundreds of Thousands a Year.” Themorningcall.com, 25 Nov. 2017, www.mcall.com/news/nationworld/pennsylvania/mc-nws-pensions-pa-top-earners-20171125-story.html. McGuinn, Patrick. “Pension Politics: Public Employee Retirement System Reform in Four States.” Brown Center on Education at Brookings. February 2014.