Final State Budget Falls Short on

Adequate Funding for Teachers’ Pension System

State Budget Update – July 2, 2010

On June 30, the General Assembly passed the final spending for the 2010-11 fiscal year.  The $28.04 billion budget increases spending by $207 million, or 0.74 percent, over last year’s plan, and does not require any tax increases.  Although it was $1 billion less than the governor had originally requested, there are several items contained in the final plan that prevented me from supporting it.

Most notably, this budget underfunds the Public School Employees’ Retirement System (PSERS) by $135 million.  For the past several months, I have been diligently working to bring this issue to the forefront by educating my colleagues in the House and Senate on the importance of this issue.  Last month, the House passed legislation to address the long-term and short-term funding shortfalls facing PSERS; however, this bill remains in the Senate awaiting consideration.  The state cannot shirk its responsibility to the pension system.  Serious financial troubles are facing, which will have a negative effect on school property taxpayers.  By reducing the amount of money necessary to keep PSERS sustainable, the problem will only become worse. 

In addition, this budget relies on the federal government providing the state an additional $850 million in funding for Medical Assistance.  This additional allotment has yet to be approved by Congress and at this point it seems unlikely.  The reliance on “phantom” revenue is of great concern because of the serious deficit that will be created if this money does not come through.  I believe it is wrong for state government to spend money it does not have.

Next year, when the federal stimulus funding ends, Pennsylvania’s revenues will drop by nearly $3 billion.  We have known since the stimulus program was enacted that it would last only two years and state government spending has only increased during this time.  I believe the responsible course of action would have been to reduce spending to adequately prepare for the financial challenges ahead.