Pennsylvania Governor Won’t Sign Budget, Citing Pensions

Photographer: Scott Eells/Bloomberg

Tom Corbett, governor of Pennsylvania. Close

Tom Corbett, governor of Pennsylvania.

Photographer: Scott Eells/Bloomberg

Tom Corbett, governor of Pennsylvania.

Pennsylvania Governor Tom Corbett refused to sign a $29.1 billion budget for the fiscal year beginning today because it doesn’t reduce pension costs.

Corbett, a 65-year-old Republican, said he would work with the legislature his party leads on “meaningful pension reform,” in a statement released yesterday after both chambers voted on the spending plan.

“I am withholding signing the budget passed by the General Assembly while I deliberate its impact on the people of Pennsylvania,” he said. Pennsylvania’s government remains open as there’s no immediate impact from a lack of a budget at the beginning of the fiscal year.

Financing retiree benefits is a deepening challenge for localities nationwide as they recover from the 18-month recession that ended in 2009. Governments last year paid more for pensions, 83 percent of their required annual contributions, up from 81 percent a year before, while the systems had about 72 percent of the money needed to meet retirement obligations, unchanged from the year before, the Center for Retirement Research at Boston College said.

Pension costs take up more than 60 cents of every new dollar in general-fund revenue, said Corbett, who is running for his second term in November.

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Pennsylvania’s unfunded liability is set to grow by 38 percent to $65 billion in 2018, according to state estimates. Corbett supports a plan for new state and school employees that incorporates both a defined-benefit plan and a defined-contribution plan similar to a 401(k). Legislators haven’t voted on it.

Standard & Poor’s ranks Pennsylvania AA, third-highest, with a negative outlook, saying in April that its growing pension liabilities may stress its budget. The system has 62 cents for every dollar in obligations, S&P said.

Pennsylvania’s Senate and House of Representatives are scheduled to convene today. Last night, the Senate unanimously approved a bill that would move all officials, when elected, re-elected, or retained to a new judicial term after November, to automatic enrollment in a defined-contribution plan. The measure, if approved by the House and signed by Corbett, would save $690 million through the end of fiscal 2052, according to a legislative memo.

A Pennsylvania general-obligation bond due October 2029 traded yesterday at an average yield of 2.9 percent, or 0.72 percentage points over benchmark munis, less than the average of 0.75 percentage points seen since January, data compiled by Bloomberg show.

To contact the reporter on this story: Romy Varghese in Philadelphia at

To contact the editors responsible for this story: Stephen Merelman at Stacie Sherman

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