- Associated Press - Thursday, July 9, 2015

HARRISBURG, Pa. (AP) - Gov. Tom Wolf shot down another key Republican agenda item Thursday, vetoing a GOP-crafted bill to overhaul Pennsylvania’s two major public employee pension systems, saying it would provide no immediate cost savings and inadequate long-term savings.

It also would have forced newly hired state government and public school employees to help pay down the cost of existing pensions, the Democratic governor said. In addition, Wolf said, an element of the legislation would have violated federal tax law.

The bill was an improvement over earlier GOP plans, Wolf said. But “it’s still not good for employees moving forward. We are not going to attract good employees to our system with that particular pension bill,” he said Thursday in a live telephone interview with a Pittsburgh radio station.

In a separate statement from his office, Wolf said the GOP’s pension bill “does not address the problems facing our pension system comprehensively and fairly.”

The Republican majorities in the House and Senate had pushed the legislation to Wolf’s desk last week without input from the governor or a single vote of support from Democratic legislators.

The three ranking Republican lawmakers in both the House and Senate issued a statement saying they were “dismayed” by the rejection. The proposal would have ended the traditional pension benefit in favor of an alternative that would include 401(k)-style defined contribution plans for future state and school employees.

“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 Wolf will be taking another step to ensure Pennsylvanians pay significantly higher taxes, in order to fund an outdated retirement system which is out of step with what average Pennsylvanians receive,” the GOP leaders said in the statement.

During and after his campaign for governor, Wolf maintained that he supported the existing traditional pension benefit, and opposed scrapping it in favor of a 401(k)-style plan.

When the state’s 2014-15 fiscal year ended last week, Wolf vetoed a $30.2 billion Republican budget plan and a separate GOP-crafted bill that would have privatized Pennsylvania’s state-controlled liquor and wine sales, leaving the state without a budget. But he held on to the pension bill until the day before the deadline for signing it or allowing it to become law without his signature.

Many states are struggling to cover the rising cost of their state and school pension plans. While 31 states maintain defined-benefit plans as their primary retirement benefit, others offer different plans on a competing or mandatory basis, according to the Denver-based National Conference of State Legislatures.

Since 2009, eight states have replaced their defined-benefit plans with an alternative such as a defined-contribution, hybrid or cash-balance plan, said Anna Petrini, a policy associate for NCSL. By November, 13 states will not offer new employees a defined-benefit plan, she said.

The Pennsylvania bill would have had little effect on the roughly 700,000 current employees, retirees and beneficiaries in the traditional defined-benefit pension plans. But most future state and school employees would have seen changes designed to reduce payments of about $11 billion over three decades on an estimated $53 billion pension debt that is partly the result of the state paying less than its fair share in previous years.

The scuttled plan would have combined a 401(k)-style defined-contribution plan, whose cost would be shared by employees and employers, and a “cash-balance” plan financed by the employees.

Future employees would have been required to contribute at least 3 percent of their salary into the defined-contribution plan and employers would have had to contribute an additional 2.9 percent for school employees and 4 percent for state workers.

The employees also would have been required to contribute 3 percent of their salary into the cash-balance plan, which would guarantee them a 4 percent return and any excess investment gains would be shared between the employee and employer.

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