Jun. 30, 2015

HARRISBURG - Rep. Warren Kampf (R-Chester/Montgomery) today joined a majority of his colleagues in the state’s lower chamber in passing historic pension reforms that he has fought for since his election to the House of Representatives.

“This legislation is a turning point in securing Pennsylvania’s economic future,” Kampf said. “It will help stop the ever-growing pension liability that is burdening state government and school districts while still providing a fair retirement benefit for new employees and keeping our promise to current enrollees and retirees.”

Kampf explained that the continued increase of employer contributions to the pension system have been the driving factor behind increased costs for school districts – and increased property taxes for homeowners. Without these changes, an amount equal to (or greater) than 30 percent of the salaries of teachers and other school employees will go to funding these looming pension costs. That’s money that cannot go to books, infrastructure or classroom instruction.

The two public pension systems have a combined “unfunded liability” – the difference between the amount of benefits due enrollees and assets available -- of at least $53 billion. The estimated cost of this liability is more than $30,000 for every Pennsylvania working resident.

“Today we took the right and responsible action in addressing this pension crisis, and I am happy to have played a lead role in making it happen,” Kampf said. “This legislation will save taxpayers approximately $10 billion while providing a more predictable, sustainable cost structure for the future.”

The legislation passed by the House – Senate Bill 1 – includes key components of Kampf’s own pension reform legislation (House Bills 1352/3 and 727 which had previously been reported out of committee) including moving new hires away from a full defined-benefit system, and moving current and future legislators to a defined-contribution system.

It was because of Kampf’s experience with, and knowledge of, the pension issue that he was tapped by House leaders to lead the floor debate over the legislation that led to its successful passage.

Under Senate Bill 1, future state employees first hired on or after Jan. 1, 2016, and future school employees first hired on or after July 1, 2016, will be assigned to a defined contribution/cash balance hybrid plan, similar to the 401(k) plans offered by the private sector. The current system is a defined benefit plan.

By moving future employees to a defined contribution/cash balance plan, Senate Bill 1 shifts risks associated with volatile markets and benefit enhancements away from taxpayers; it also enhances the portability of future state and school employee retirement benefits.

“The bill stops the creation of new unfunded liabilities associated with adding new members to the defined benefit plan,” Kampf said. “Quite simply, we are forcing the state to stop digging the hole that taxpayers are in.”

Other highlights of the pension reform legislation include:

• Changes that address issues such as overtime abuse or “spiking” of pension salary calculations for state employees.

• Ending the unintended “interest rate bonus” for those who take a lump sum upon retirement to make the transaction financially neutral.

Kampf, who has refused the defined-benefit pension since his election to highlight the need for public pension reform, stated, “This is critical legislation that sets us on a sustainable path, shifts risk away from the taxpayer, protects the benefits of retirees, saves billions of dollars, and provides a fair benefit for employees. I urge the governor to sign this legislation.”

Representative Warren Kampf
157th District
Pennsylvania House of Representatives
Media Contact: David Foster
RepKampf.com / Facebook.com/RepKampf