PA State House Representative 157 Race . . . Candidate Question #1 and Response

This is the Candidate Question & Response Forum for the State House 157 candidates.  As previously stated, candidate Warren Kampf declined to participate in the question and response forum.  Candidate Paul Drucker’s response follows the question.  Each Monday for six weeks, a new question and response will be posted.  The candidate forum will end the week before the election.

Question #1:   How is the Commonwealth going to help the Tredyffrin-Easttown School District’s ballooning pension obligations?

Paul Drucker’s Response:

It is important to note that there is no silver bullet to fix the pension obligations of Tredyffrin-Easttown or any of the other school districts in the 157th district. The situation in which we currently find ourselves is a cumulative effort that has been in development over the past 11 years of irresponsible handling of the pension system, combined with the stock market collapse of 2008.

Eleven years ago the rules were changed concerning vesting, multiplier rates, lump sum payouts, actuarial analysis and other matters. As a result, the Commonwealth and the respective school districts find themselves with millions of dollars of unfunded liabilities and are facing a potential spike in the payments due in the immediate future in the billions of dollars.

There are some acts the legislature can take to begin fixing this problem. This session, the House passed a pension reform bill that relieves many of these problems. By reducing the multiplier used to calculate benefits, eliminating the lump-sum payout employees receive and raising the retirement age, we addressed this crisis in a responsible, bi-partisan manner. 194 members of the House voted in favor of the bill (although, surprisingly, my opponent has stated that he opposes it). While the Senate has not yet taken action, I strongly encourage them to do so.

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  1. While I appreciate Mr. Drucker’s effort to respond. I think it’s important to note that the PSERS Board passed a resolution strongly opposing the changes to PSERS for the next school year (the rate was reduced from 8.22 to 5.64). The bill referenced does address some issues going forward, but does nothing to address the unfunded status of the PSERS liabilities. (In 2008, PSERS funded status was 86%; it fell to 79.2% in 2009 and the 2010 figures are not readily available to my knowledge) The PSERS Board review indicated that this “solution” was nothing more than once again deferring the problem.

    WHEREAS, the Public School Employees’ Board (PSERB) today took action to reduce and recertify the employer contribution rate for 2010-11 from 8.22% to 5.64% as prescribed by Act 2010-46; and

    WHEREAS, this action was taken solely because, upon the advice of legal counsel, the Law directs the PSERB to do so, notwithstanding many Members of the PSERB were personally opposed to the directed re-certification given PSERS’ current funding challenges; and

    WHEREAS, the vote of many Members of the PSERB was also made under protest as, unlike past re-certifications of the employer contribution rate by the PSERB, this re-certification was not the result of either a modification of the Public School Employees’ Retirement System’s (PSERS) funding methodology or any other change made to the Public School Employees’ Retirement Code (PSERC); and

    WHEREAS, said directed action regarding the employer contribution rate re-certification also sets a dangerous precedent to deliberately use the Fiscal Code to continue the under-funding of PSERS regardless of the actual funding needs of PSERS; and

    WHEREAS, the PSERB is also deeply troubled by the legislative directive to reduce the employer contribution rate from the amount previously certified, for the following two reasons:

    (1) Act 2010-46’s directive to recertify the employer contribution rate undermines the PSERB’s fiduciary responsibility to maintain a properly funded pension plan as required by the PSERC; and

    (2) The mandated re-certification of the employer contribution rate not only fails to address the serious long-term under-funding of PSERS, but increases the unfunded liability of PSERS; and

    WHEREAS, PSERS has made numerous presentations on the need to resolve the funding challenges facing the System, including the reasons for and the options to resolve that under-funding; and

    WHEREAS, several bills are pending in the General Assembly that seek to address all or a portion of the funding challenges that face PSERS; and

    ….
    I refer you to the bill (goggle it) to read….but short version: the new employees will only get 2% a year if they contribute the 7.5% of their own payroll (which is what current employees contribute for a 2.5% accumulation). The new employees become class T-E ….they provide for a T-F class for new employees, but want a 10.3% contribution for that same 2.5% accrual rate.

    Lots of actuarial noise in the bill, but it also changes the “unfunded” amortization from 10 years to 30 years…which is how they can reduce the contribution rate for districts (which of course is half paid by the state).

    Here’s one provocative version of a bottom line: the bill was introduced by Dwight Evans…the same person in the famous check photo with Mr. Drucker. It incorporates part of what the Governor wanted to include (a collar rate — also actuarial mumbo jumbo in my reading). There is no question that it is meant to solve the problem — but it solves it the same old way — borrowing from the future. The PSERS Board has continually pointed out that there is an actuarial funding required — and changing the rules for people coming into the system won’t make a hint of difference for 30 years….it’s a state version of Social Security….current teachers and taxpayers will never catch up.

    So — Mr. Drucker’s comment that “surprisingly, (his) opponent has stated that he opposes it” is clever oratory….but anyone determined to instill some fiscal discipline in the state government and accepting the PSERS response would oppose it until the whole deal is on the table….and absent a senate version, we all know this is just election rhetoric.
    Mr. Petersen will no doubt accuse me as he has others of “carrying water” for Mr. Kampf on this, but I believe that Mr. Drucker is carrying water for Mr. Evans…and I do not believe there is any effort at fiscal discipline that makes hard choices. Fact is, if you are part of the system that voted for this year’s budget, you are part of the system that is unwilling to make hard choices.

    This is from an historian at Penn State, Ken Wolensky: He states what many of us have been saying here and elsewhere:

    “Cutting government and its costs comes at tremendous costs and those costs aren’t about just dollars and cents.

    What citizen doesn’t want a balanced state budget, good roads, clean and safe parks, a sound correctional system, quality education for our children, public health services that stave-off infectious diseases and overall quality government services?

    Now, the next question is: Are we willing to pay for these services just like we would those services that we consume in the private marketplace?

    These are questions that each citizen can ponder and on which they can reach their own conclusions.”

    Vote for someone — not against someone.
    Rant over.

    1. What’s wrong with voting against corrupt and unethical standards. Those are the hallmarks of Warren Kampf’s campaign, right? Given that he ducked Pattye’s question, I guess we can add incompetent to Mr. Kampf’s traits as well.

      1. Didn’t you say enough on the Suburban website?

        I hardly think that failing to respond to a blog Q&A equates to “ducking” — but you know my thoughts anyway. You believe WK is the devil you know — I believe another democrat in Harrisburg is the devil I don’t want to know. SOMEONE has to stop the insanity…I’m looking for the “change we need” — but then again, that’s why you get to pull the curtain when you vote. It’s YOUR decision.

  2. Aug. 30, 2010 HARRISBURG, PA – The Public School Employees Retirement System (PSERS) today announced the Fund posted a positive 14.59 percent for the fiscal year ended June 30, 2010, outperforming the 12.00 percent median return of the Wilshire Associates Inc.’s database of public pension funds and the 10.87 percent return of the Fund’s custom policy benchmark.

    PSERS Chief Investment Officer Alan Van Noord reported, “PSERS’ investments rebounded adding over $6 billion in net investment income to the Fund over the past fiscal year and earned well above the Fund’s assumed long-term actuarial investment rate of return of 8.00 percent……More at:

    http://www.psers.state.pa.us/invest/PressRelease/2010/PR_8_30_10.pdf

    1. I would not put much stock in anyone’s one year return. According to PSERs their 5 year average annual return is 2.99%, 10 year is 3.51%, and 25 year is 8.83%. It’s not clear if this is net of all expenses, including PSERs’ operating costs.

  3. Wow, spoken like someone that truly believes money is burning a hole in taxpayers’ pockets!!

    Paying taxes is fine and everyone should pay their fair share. But when you have budgets that are so top heavy with payroll and benefits, and just maybe some of that money will be spend on the students, you have to question the management and the priorities of that budget, and not just at the state level.

    1. Good points. And it should be noted that in the case of TESD, that mis management has been at the hands of the GOP. When C.T. Alexander and Mike Broadhurst talk about Tredyffrin being the “Gold Standard”, you have to wonder whether they are talking about fools gold. It is interesting that their candidate is too unsure of his position to answer the question. I find that very telling. I suppose there are those in the GOP that will try to white wash the fact that Kampf didn’t answer. No matter the white wash, he didn’t answer and that is very telling.

      1. Oh John — Kampf did answer — he just didn’t use Pattye’s blog to do it. He answered in response to the bill Mr. Drucker is touting ( you know — the one that offers more of the same….) Using his own website was his choicel…. to express his views: (how novel?) Getting info from the CANDIDATE???

        Here is his answer to Pattye’s question:

        Kampf on State House Pension Action: Too Little, Too Late
        June 16th, 2010
        PAOLI – Warren Kampf, Republican candidate for State Representative in Pennsylvania’s 157th Legislative District, today criticized the State House for actions it took to address a looming pension crisis during yesterday’s legislative session.

        “With Pennsylvania facing a $1.5 billion deficit and state and local governments as well as school districts facing a pension crisis of the Legislature’s making, the State House fell short yesterday in truly helping taxpayers,” said Kampf. “Their efforts are too little, too late.”

        The House action delayed and equalized the costs looming over governments at all levels, as well as reduced some benefits for newly hired state workers and teachers. Ultimately, taxpayers will be on the hook for the massive costs brought about by past legislative action.

        “When the politicians in Harrisburg increased their own pension and the pensions of state workers and teachers, they weren’t thinking ahead to days like today where the economy is troubled, and they weren’t thinking about the cost to taxpayers,” stated Kampf. “Instead they were thinking of their pocketbooks and thinking about how to garner political support.”

        “Now, when the opportunity for real change presented itself, the politicians in Harrisburg once again nibbled around the edges to gain a public relations bump for their re-election campaigns,” Kampf continued. “This is another lost opportunity to show leadership and courage, and put taxpayers first again.”

        Kampf supports significant changes to the state pension system, including rolling back the pension increase for legislators and, most importantly, changing to a defined-contribution style pension system.

        “We need to make Harrisburg work more like the real world – with 401k-type retirement systems for all workers and by forcing legislators to submit for legitimate expenses instead of taking per diems,” said Kampf. “I would have fought for those changes yesterday in the House and I will fight for those changes as Representative.”

  4. Pension issues: the “bill” that Mr. Drucker references and champions is a way of addressing the problem using the exact same methods….just manipulating the actuarial assumptions. Mr. Buckwalter’s investment report is good news, but PSERS was forced to recertify the rate for next year from 8.22 to 5.64 prior to that information, and it still falls far short of fixing the problem. Now, if we think we can count on investments exceeding 8% annualized returns, then the 29% rate for two years out might be high.

    Bottom line — we have to change the way we do business, and that takes someone who is willing to alienate some constituents. That’s not a normal political instinct. The bill Mr. Drucker references continues more of the same — a defined benefit pension without regard to earnings. Industry has gone to 401Ks == defined contribution plans and the like — but defined benefits in a bill going into the future is not particularly well crafted.

    Version — which comment were you responding to? I am only pointing out that the mentality of claiming to solve a problem by simply changing the assumptions is not exactly a brave fix. The final quote was meant to remind us that the only way we are going to generate fiscal discipline is by making cuts….and no one likes cuts….but do they hatecuts less than they hate tax increases?

  5. While I appreciate Andrea’s effort to “set us all straight”, in the process she casts a negative light on our governor, Rep. Dwight Evans and by assocation, Rep. Drucker. We all know that political game.

    Just a reminder – the pension funding problem began under the illustriousTom Ridge. In hindsight, the mandated contributions by the state and school districts should not have been decreased just because of a temporary fund surplus.. But they were – for the purpose of cutting spending and keeping taxes down.

    Hindsight is 20-20. And the depth and length of the 2008-9 downturn could never have been predicted .
    .
    This bill is a first pass. Though it extends the amortization period for unfunded pension expense from 10 to 30 years, it reduces lump sum payouts and increases the minimum retirement age for employees going forward. Both are money savers.

    If Andrea’s suggestion is that a singular neophyte legislator could go to Harrisburg and lead the effort to revamp the state pension system, pardon me while I laugh.

    It’s a tough slog building associations and learning the ropes in Harrisburg. Paul has spent the last twenty months doing that . He has worked with legislators on both sides of the aisle to get things done. He is Tredyffrin’s point man on the turnpike expansion, one of he region’s experts on transportation issues, and Paoli and Phoenixville’s go-to guy on redevelopment and revitalization .

    Andrea’s right.:Voters should go to the polls and vote FOR the better candidate on Nov. 2.

  6. Kate — I’m not sure how to interpret your use of quotation marks around “setting us all straight” — as I believe Mr. Drucker’s reply to Pattye was intended to do just that….and all I wanted to point out was that the changes he offered in response to the question made via the bill that HE insinuated was worthy of passing but Kampf opposed were in fact just “more of the same”….None of the changes are money savers Kate, as you are extending a program of retirement to new hires that could be zero….they are money savers in the same way that a 20% coupon is a saver — except you still have to spend the 80% to save the money. We’re selling the same product with that bill — just charging a different price to the employee, but doing nothing to protect the taxpayers in school districts throughout the state. The bill still offers a defined benefit plan — and presumes that going on to any new hire at the 2% accrual rate, and the 2 1/2% accrual rate for anyone willing to pay in 10+%. It’s still asking the taxpayers to take on all the risk of the future investment strategies –because it still promises a definied payoff regardless of performance.

    So — you can call it a political game, and you can call the bill a first pass — and you can go back to Ridge and start the clock rolling. But we vote for someone who will go to Harrisburg in 2011….no do-overs. I will pardon you while you laugh at the idea that a new legislator could pursue changes…because you are stating that the old legislator has built associations — and I’m suggesting that those alliances are not about what is best for TE taxpayers or PA taxpayers with a budget passed that included revenue that was purely hypothetical. I do believe the Dwight Evans check moment — without Duane Milne I might add — was a partisan WAM stunt… Paul is your “go to guy” because his party is the majority in the house….and I guess I’m suggesting that I would like to see voters consider exactly who offers the “change that we need.” I think the change we need will take a singular approach to cutting spending. I think the choice between the two candidates — and who is likely to do that — is up to the voters.

    But we agree on your final conclusion — voters should go to the polls and vote FOR a candidate….which means learning about the issues, not just reading and espousing the talking points and the rhetoric.

  7. Okay – come on now lets all stop giggling at how funny this is…. Pattye saying Warren Kampf declined to respond would be like one of Warren’s campaign workers doing a Q&A and being shocked when Paul would decline to particpate. If you want answers to questions that measure them side by side look at what is there as far as naked truth; look at Route 422 tolling as an issue – spending increases versus reducing spending – expanding govt or decreasing govt. – This whole things is funny… “Warren Kampf declined..” Yea Pattye I guess he would, I have 12 softballs, er, questions for Warren Kampf, and Paul Drucker, where can I send them?
    So drop the farce, although it is funny to see that Drucker totally missed your pitch… I mean you tee it up for him and he still blows the answer… On second thought, please keep the questions coming – I think Warren went up two more points with Drucker’s answer!

  8. Thanks Sean for getting to the point.

    I have to say that as the election gets closer, it gets a bit comical to see how each side tries to elevate their status. Kampf is an independent Republican and promotes his relentless and often unpopular efforts to reduce costs — and I got a mailer from Drucker yesterday that says he is a “true fiscal conservative…ensured that this year’s state budget had no new taxes or tax increases”… (how about revenue shortfalls and extensive new debt?) …. kind of sounds like the party line isn’t what they are seeking. The only reference to Democrat on Mr. Drucker’s full color mailer was in the return address….

    Why don’t they both save the coin on these mailers and “fund” a debate….

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