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Pennsylvania’s Corbett Cuts Some Legislative Funds in Budget

July 10 (Bloomberg) -- Pennsylvania Governor Tom Corbett signed the budget for the year that began July 1 while stripping out some funds for the legislature, which he admonished for not taking action on mounting pension costs.

The 65-year-old Republican said in a press release today that he vetoed $65 million from the General Assembly’s $330 million budget. He also struck $7.2 million in legislative earmarks, and said the 253-member legislature has reserves for about three months.

“They filled the budget with discretionary spending, and then refused to deal with the biggest fiscal challenge facing Pennsylvania -- our unsustainable public pension system,” Corbett, who is running for re-election in November, said in a news conference in Harrisburg. “For these reasons, I am forcing mutual sacrifice with the General Assembly.”

Corbett on June 30 refused to sign the $29.1 billion spending plan approved by the Republican-led legislature, saying it didn’t reduce retirement expenses.

Financing retiree benefits is a deepening challenge for localities nationwide as they repair their finances following the 18-month recession that ended in 2009.

Funding Laggard

Pennsylvania’s pension system is 62 percent funded, according to Standard & Poor’s. The average public system had about 72 percent of the money needed to meet retirement obligations in 2013, according to the Center for Retirement Research at Boston College.

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 system and a defined-contribution approach similar to a 401(k). Legislators haven’t voted on it.

Corbett said lawmakers recessed leaving “unfinished business.” The senate is scheduled to return in September, and the house in August.

“They need to come back and enact pension reform,” Corbett said. Asked if he would call for a special session, he said, “all options are on the table.”

Override Option

Lawmakers can override the governor’s veto with a two-thirds vote of each house.

Four Republican senate leaders, including President Pro Tempore Joe Scarnati and Majority Leader Dominic Pileggi, said in a statement that the governor’s cuts may be unconstitutional.

Corbett hasn’t been able to “work effectively” with Republican legislators, they said. “While we share the desire to enact statewide pension reform, linking pension reform to punitive program cuts is not a successful strategy,” the senators said.

To contact the reporter on this story: Romy Varghese in Philadelphia at rvarghese8@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Tannenbaum, Stacie Sherman

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