Commonwealth Foundation: Defined contribution plans may solve state's pension crisis

Nathan Benefield, the vice president of policy analysis at Pennsylvania's Commonwealth Foundation, recently said that the state must reform its pension system in order to protect public workers from cuts in benefits.

Pointing to Detroit's recent bankruptcy, Benefield said the Michigan city's "failure to address" pension problems similar to those facing the state of Pennsylvania illustrates the potential outcome of not enacting pension reform.

"Detroit's bankruptcy, which was spurred by public pension debt, gives Pennsylvania a window into its own possible future if government union leaders continue to get their way and block meaningful pension reform," Benefield said. "The city's bankruptcy proceedings have made it clear that pension debt can threaten not only taxpayers, but even the benefits of current workers and retirees who thought their pensions were 'guaranteed.'"

Detroit voters are poised to weigh in on a potential 4.5 percent reduction in pension benefits, with no cost-of-living adjustments, as the state confronts public pension debt.

Pennsylvania is facing its own pension debt problem - -more than $50 billion. According to the Commonwealth Foundation, state employees and school workers face cuts to services, layoffs and higher taxes, and some Pennsylvania cities may even go bankrupt.

Benefield said, however, the state may be able to avoid the negative consequences of growing pension debt by adopting a solution implemented in the state of Oklahoma.

"Oklahoma's new law putting future state workers into defined contribution plans will stop throwing more workers into a sinking ship and avoid the pension debt which sank Detroit," Benefield said. "The choice for Pennsylvania could not be clearer."

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