Tag Archives: Pennsylvania pensions

The Pension Time Bomb

482328139 - with redAs Governor-elect Tom Wolf and the new General Assembly prepare to take their respective oaths of office in January, a recent report by the Independent Fiscal Office (IFO) sheds more light on Pennsylvania’s growing fiscal malaise. The Economic & Budget Outlook: Fiscal Years 2014-15 to 2019-20 is available at www.ifo.state.pa.us.

In short, the report finds that the state will face a shortfall of $1.85 billion in fiscal year 2015-2016, which includes $171 million for the current fiscal year and $1,679 million related to next year. A slow tax base erosion and normal expenditure growth are the primary drivers of the structural imbalance. Net revenues are projected to increase at an average rate of 2.7 percent annual, but are outpaced by expenditures, which are projected to grow at an annual average rate of 4.1 percent.

Pension funding is the primary cost driver in the budget, according to the IFO report. Here’s what the report says: Continue reading

Welcome Back!

As the calendar flips from April to May, and “busy season” for many of our members continues to fade from their rear view mirrors, let me be among one of the first to welcome you back to PICPA. During the first quarter of the calendar year PICPA is busy providing networking and CPE events geared to members in industry, creating and responding to media opportunities to position CPAs as thought leaders on tax issues, and planning second semester activities at colleges and universities across Pennsylvania. The end of a busy tax season for our members represents the beginning of a busy season for PICPA networking, and we look forward to re-engaging with members.

leadership1May begins a new fiscal year for PICPA and our chapters. A spring highlight is the upcoming chapter annual meetings to install officers, reveal new strategies, and recognize outstanding volunteers, membership milestones, and successful CPA candidates. PICPA Council will meet and discuss strategic priorities and discuss recommendations from our Governance & Structure Task Force.

The PICPA Foundation kicks-off your CPE reporting year with an expanded list of webinars and on-demand CPE to complement the high quality seminar and conference presentations, and is well prepared to help you meet your new four-hour ethics CPE requirement through a variety of course delivery vehicles. June brings the retooled 116TH Annual CPA Convention back to Pennsylvania, an excellent opportunity to network, learn and grow in Philadelphia with outstanding speakers.

I would be remiss, however, if I did not mention a few highlights that occurred during busy season that you may have missed:

  • DiversityAwardLast week PICPA was honored to receive the 2013 Workplace Diversity Award from the National Association of Black Accountant’s (NABA)Philadelphia Chapter at their annual awards banquet. This award recognized the outstanding effort of our Diversity Committee in the development of their research paper Increasing Talent, Clients and Revenue for your Organization: The Business Case and Toolkit for Diversity. The committee is now working to finalize their student diversity event to be held Oct. 3, 2013 at the Pyramid Club in Philadelphia with NABA, ALPHA, and Ascend. You can find other initiatives of our Diversity Committee in the Get Involved section of PICPA’s website.
  • The Fiscal Responsibility Task Force released their 2013 report in February with a news conference in the Capitol in Harrisburg. The report is designed to provide strategic and technical expertise to help Pennsylvania’s policymakers address the state’s fiscal challenges. The report addressed pensions, financially distressed municipalities, prevailing wage, taxation, efficiencies in streamlining state government, and infrastructure issues. The Task Force did an outstanding job positioning CPAs as thought leaders.
  • PICPA has been at the table working with the Corbett administration to design a comprehensive tax reform package for the 2013-2014 state budget. In addition, we are working closely with the Department of Revenue to reform the Board of Finance and Revenue Appeal Process – this access would not be possible without the high level of regard and respect for Pennsylvania CPAs by the Governor and General Assembly and the tireless work of our State Taxation Committee.

This is a great time of year to remind members of the PICPA Promise:

PICPA preserves the legacy and propels the integrity of the CPA profession. Belonging to PICPA, along with more than 20,000 members, you have the professional and personal support to refine skills, expand knowledge, connect with like-minded people, and achieve bigger and better things at every stage of your professional life.

We look forward to re-engaging with all of our members during the next several months. When you have the opportunity to meet with a member of PICPA leadership or the team at these upcoming events, please share your thoughts on how PICPA can deliver more value to you, and thank you for your commitment to the profession and support of PICPA!

Pensions. Prevailing Wage. Taxes and More. Let the Debates in Harrisburg Begin!

With the Capitol rotunda’s white marble steps as a backdrop, members of the PICPA Fiscal Responsibility Task Force yesterday released a second report. The task force, created by the PICPA Council in 2010, is designed to position PICPA as a key public policy stakeholder in Pennsylvania.

Susan E. S. Howe, chair of the task force, said, “CPAs are in the unique position to provide state policymakers with technical expertise and strategic guidance as they address the major public policy issues of the day. The report helps strengthen our credibility with key audiences and enhances PICPA advocacy efforts. It is also a concrete example of our commitment to helping improve Pennsylvania’s economic climate.”


The task force’s first report, released in 2011, tackled 3 distinct issues: efficiency and streamlining government operations, state pensions, and transportation infrastructure funding.

In the new report, the task force updates the progress on the first set of recommendations and includes new sections on financially distress municipalities, prevailing wage, and taxation. These issues were added because the task force believes these are the next level of critical issues affecting the Commonwealth’s fiscal stability and financial well-being. We’ve clearly hit the mark. The top three questions at the press conference addressed pensions, prevailing wage, and distressed municipalities (Act 47), and this local report has brought the prevailing wage discussion to the forefront.

CapitolWhile the report has received wide support in many circles, there are some critics out there asking, “Why is PICPA doing this?” Or, “Is PICPA becoming too political?” To these individuals I quite simply say “why not!” Why should PICPA and its more than 20,000 members sit on the sidelines and let others decide the outcomes that impact us. PICPA has a civil and moral obligation to have its voice heard on the issues being discussed in Harrisburg.

With the release of this second report, PICPA is a catalyst for starting a dialogue on important issues that impact every citizen of this Commonwealth. We hand-delivered the report to every legislator and they can become familiar with the policy option we put forth and call upon us to testify and provide additional guidance as they address the state’s fiscal welfare. I encourage members to familiarize themselves with the report and follow up with their legislators to further support the PICPA’s efforts.

You can find more information about the Fiscal Responsibility Task Force by visiting www.picpa.org/fiscal.

Pension Crisis Is Here!

Pennsylvania’s pension systems are at a crisis point. Not at some point in the future. I mean right now. And yes, I said “systems.” A lot of attention goes to Pennsylvania’s two major statewide pension plans—the State Employees’ Retirement System (SERS) and the larger Public School Employees’ Retirement System (PSERS)—but the state’s local government pension systems also are woefully underfunded.

Reforming PSERS and SERS is a priority for the Corbett administration and many legislative leaders. Actuarial valuations are revealing, and a cause for budgetary concern. According to recent testimony by Budget Secretary Charles Zogby to the Public Employee Retirement Commission, the latest numbers show that SERS has an unfunded liability of nearly $15 billion and is 65.3 percent funded, while PSERS has an unfunded liability of $25.5 billion and is 69.1 percent funded. SERS and PSERS will have unfunded liabilities of $65 billion by 2021.

The impact on our state’s budget is potentially staggering. Again, according to Zogby, in the current 2012-2013 fiscal year budget, the General Fund appropriation for the Commonwealth’s share of the employer contribution to PSERS is $856.1 million, up $255.9 million, or 43 percent, from last year’s amount of $600.1 million. Similarly, Pennsylvania’s contribution to SERS is projected to be $677.4 million in the 2012-2013 fiscal year, up $209.3 million, or 45 percent, from last year’s $468.1 million.

The consistent annual increases in contributions to SERS and PSERS are crowding out other important program areas by swallowing limited funding.

This is only half of the story.

You may not be aware that Pennsylvania has more than 3,200 separate local government pension plans—25 percent of all such plans in the nation! Two-thirds of these plans have 10 or fewer active members, and many are grossly underfunded.

Municipalities across the state face ever-mounting financial challenges. Tax base loss, crumbling infrastructure, and escalating health care and pension costs strain their financial capacity. Federal funding to the states is being curtailed, and that results in less state funding to municipalities.

The pension problem is not just a city problem. Pension stress can be found in boroughs and townships in rural, suburban, and urban areas. Sixty-six of Pennsylvania’s 67 counties have at least one municipality with a pension plan that is under a high level of financial stress. About one-third of Pennsylvanians live in a municipality with a distressed pension plan.

It’s also not just a municipal problem. By 2035, local school district pension costs will be 14 times higher than today.

PICPA’s Fiscal Responsibility Task Force report [PDF] in January 2011 called attention to the growing state pension crisis.

The report notes, “State government has long delayed making difficult decisions about the growing pension obligations resulting from the defined benefit promise made to participating employees. The simple fact is the pension systems for school teachers, public employees, and state lawmakers are not sustainable in their current forms considering the fiscal challenges the state now faces.”

As a member of the Coalition for Sustainable Communities, the PICPA is working closely with its coalition partners to implement a common agenda to promote municipal financial health. Efforts include developing legislation to address the shortcomings of the binding arbitration law, Act 111, as well as legislation to address the shortcomings of municipal pension laws.

I urge PICPA members to check out the Coalition for Sustainable Communities’ website to get better informed about this vitally important issue to our state’s fiscal health.