Will inflation push Pa. legislature to give cost-of-living raises to state and school retirees? | Business News

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With inflation topping 8% this year for the first time since 1981, Pennsylvania officials are mulling what to do about state and public school retirees’ demands for the first pension cost-of-living adjustments (COLA) since 2004.

In the state Senate, two Democrats, Katie Muth and John Kane, who represent districts in Philadelphia’s western suburbs, said Monday that they planned to introduce legislation providing a cost-of-living adjustment for beneficiaries of both the Pennsylvania Public School Employees Retirement System (PSERS) and the Pennsylvania State Employees Retirement System (SERS).

“Inflation is very harmful to fixed incomes,” and with prices so much higher in an election year this year, “the chance of passing a COLA really should be better” than at any time since the last increase was passed 20 years ago, the Pennsylvania Association of School Retirees told members in a recent note praising the senators’ proposal.

But it will be “a challenge” to enact a raise, the group added, noting the legislative session has about 10 days left, and a proposal would need the support of both parties and Gov. Tom Wolf.

Left unstated by the retirees’ group, but all too familiar to state budget officials: After years of underfunding and disappointing investment returns, both plans have deficits running into the tens of billions of dollars, which lawmakers have been reluctant to increase by boosting retiree payouts.

Combined, the systems pay retirement and survivor pensions to more than 370,000 Pennsylvanians. Payouts average a little over $2,000 a month but vary widely; career state worker retirees collect an average around $31,000 a year, and teachers with at least 20 years’ service collect around $33,000, while hundreds of retired senior school staff collect over $100,000.

 

But thousands who retired before 2001, when pension rates were lower, collect far less.

The senators circulated co-sponsorship memos Monday showing they plan to introduce two separate proposals that would give beneficiaries of both PSERS and SERS their first COLA since the last ones were approved in 2002. The memos note that inflation has boosted consumer prices more than 50% from 2002 to 2022.

“The number of people who that have emailed my office since introducing the memos is astounding, all in support of it,” Muth said Monday, several hours after announcing the proposal. She joined the PSERS board last year and has often clashed with board leadership, which Muth has accused of excessive secrecy and an overly complex, expensive investment policy.

Gov. Tom Ridge signed legislation to increase state and school pensions and reduce eligibility in 2001, and a scheduled increase took place two years later. Pensions are based on years of service and highest annual pay before retirement. But the plans in the 10 years after that law passed slipped from well-funded to badly underfunded, as investments and “employer contributions” from taxpayers failed to keep pace with pension payouts. The General Assembly has improved no new increases since that time.

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