Slice of Pennsylvania pensioners take home 6 figures
Public service yields generous, long-lasting rewards — at least for Pennsylvania’s top school and state employees.
Despite the economic downturn and state budget woes, records from Pennsylvania’s two largest pension systems show that the number of state and school retirees collecting annual pensions of more than $100,000 has more than doubled to 658, up from 253 in 2007. Some pensioners receive more than $300,000 a year, records show.
Most of the retirees worked as public school administrators or professors from Penn State and the 14 State System of Higher Education universities.
They may be among the most comfortable public employee retirees in Pennsylvania, where the Census Bureau pegged the mean household retirement income at $18,240 a year in 2010.
Taxpayer Ray Eifler, 72, a retired USAirways maintenance worker from Center Township in Butler County, said such numbers make his head spin.
“The whole system needs an enema. That’s just wrong, wrong, wrong. They don’t deserve that,” said Eifler, who thinks government employees enjoy too many perks.
Pennsylvania’s public pension high rollers represent a small slice of the 300,000 state and school pensioners, but they are part of a growing group of recent retirees whose benefits jumped with a 25 percent pension bump in 2001. Lawmakers eager to boost their benefits by 50 percent bestowed the bonus on the larger group as part of a deal legislative leaders and then-Gov. Tom Ridge crafted.
Although the pension systems aren’t in danger of going bankrupt, a decade after that boost, state and local school officials are struggling to pay for burgeoning pension obligations.
The lifetime value of the pensions can easily hit seven figures. An expert witness at the recent corruption trial of former state Rep. Bill DeWeese testified that DeWeese’s pension, which he forfeited upon his conviction, was valued at $2.8 million.
“We have to address pensions. We have to fix it. … It’s a Pac-Man eating up the budget,” Gov. Tom Corbett said, warning that community services could be on the chopping block as pension obligations increase from $1.1 billion this year to $4 billion in 2016.
Taxpayers United, a nonprofit group crisscrossing the nation to draw attention to the cost of generous public pension systems, suggests ending traditional public pensions that pay lifelong benefits in more than 40 states.
“The way to fix the broken pension system is to replace pensions for all new government hires with Social Security and 401(k)s, and increase current employee contributions,” said Taxpayers United spokeswoman Christina Tobin.
Others insist no simple answer exists.
Keith Brainard, research director for the National Association of State Retirement Administrators, said studies show 410(k)-type plans are not always cheaper than traditional pension plans and might carry higher administrative costs. Brainard said Pennsylvania’s 2001 pension bump and decisions to artificially alter contribution rates to levels well below the recommended levels contributed to problems.
“It was or should have been clear to everyone that a sharp benefit cost increase would take place. … Switching to a 401(k) won’t help here. That’s fighting the wrong fire,” Brainard said.
Retirees receiving $100,000 pensions through the State Employees Retirement System, or SERS, include 55 judges and court employees, six state representatives, two state senators, 103 Penn State University professors and administrators and 98 professors and administrators from the 14 state-owned universities.
According to SERS records, top pensioners include Stephen J. Benkovic, a retired Penn State chemistry professor who receives $443,879 a year, and Irene Mitchel, a retired East Stroudsburg University art professor who receives $332,699 a year. Gary C. Schultz, a retired Penn State vice president of finance who is awaiting trial on charges related to the Jerry Sandusky child sexual abuse scandal, is third on the list, receiving $330,699 a year.
The Pennsylvania School Employees Retirement System, or PSERS, pays 336 pensioners $100,000 a year, compared with 322 in SERS. But top pensioners in the school system draw less than their counterparts in the state employees fund.
Anthony V. Costello, who retired as superintendent of Garnet Valley School District in eastern Pennsylvania in 2010 with a $222,685 a year pension, tops the PSERS list. Robert G. Witten, who retired last year from Central Susquehanna Intermediate Unit with a yearly pension of $187,674, and William J. Martin of Williamsport, who retired last year with a pension of $185,255, were the second- and third-highest pensioners.
At the other end of the public pension spectrum, longtime state and school pensioners who retired before the pension bump have waited years since their last cost-of-living adjustment, known as a COLA, in 2002.
Villa Leslie, 79, of Somerset County, who receives a state pension of $472 a month, retired in 1997. A long-time member of her county’s chapter of the Pennsylvania Association of Retired State Employees, Leslie is angry that her group suffered while others reaped large pensions.
“We haven’t had a COLA for … years. But (lawmakers) get them every year. They passed a law saying that in 1994. They got 2.3 percent in January,” she said.
Richard C. Rowland, executive director of the Pennsylvania Association of School Retirees, said the group tried to warn lawmakers about what they created with the 2001 pension bump: “Everyone focused on the benefit the legislators gave themselves but they weren’t paying attention to the time bomb legislators put into that act.”
He said retirees were told it’s unlikely they’ll receive cost-of-living raises while the state struggles with escalating pension costs. The pain doesn’t stop with them, however.
College students are feeling the sting. This spring, Corbett told University of Pittsburgh students facing tuition increases that rising pension obligations and limited revenue spurred him to suggest a second year of big reductions in state subsidies to public universities.
The state’s two pension systems are funded by a combination of employee contributions, investment returns and employer contributions, the last of which is tax money.
State courts have ruled that pension benefits for employees and retirees can’t be cut. But lawmakers can change the benefit for new hires and rolled back the 2001 boost for those hired after Jan. 1, 2011.
Corbett said he wants further adjustments but said it is unlikely the Legislature will consider the issue before next year. He declined to say what he would recommend.