Commonwealth of Pennsylvania House of Representatives
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COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES JOINT PUBLIC HEARING STATE GOVERNMENT COMMITTEE/EDUCATION COMMITTEE STATE CAPITOL MAJORITY CAUCUS ROOM ROOM 140 HARRISBURG, PENNSYLVANIA THURSDAY, MARCH 26, 2009 9:08 A.M. PRESENTATION ON PENNSYLVANIA PUBLIC PENSION FUND ISSUES BEFORE: HONORABLE BABETTE JOSEPHS, MAJORITY CHAIRMAN, STATE GOVERNMENT COMMITTEE HONORABLE JAMES R. ROEBUCK, JR. MAJORITY CHAIRMAN, EDUCATION COMMITTEE HONORABLE H. SCOTT CONKLIN HONORABLE LAWRENCE H. CURRY HONORABLE FLORINDO J. FABRIZIO HONORABLE JARET GIBBONS HONORABLE RICHARD T. GRUCELA HONORABLE PATRICK J. HARKINS HONORABLE BARBARA McILVAINE SMITH HONORABLE MICHAEL H. O'BRIEN HONORABLE RICK TAYLOR HONORABLE ROSITA C. YOUNGBLOOD HONORABLE JOHN T. YUDICHAK * * * * * DEBRA B. MILLER REPORTING (717)439-3785 [email protected] 2 1 BEFORE (cont.'d): HONORABLE KERRY A. BENNINGHOFF, 2 MINORITY CHAIRMAN, STATE GOVERNMENT COMMITTEE HONORABLE PAUL I. CLYMER 3 MINORITY CHAIRMAN, EDUCATION COMMITTEE HONORABLE JIM COX 4 HONORABLE TOM C. CREIGHTON HONORABLE SHERYL M. DELOZIER 5 HONORABLE MATT GABLER HONORABLE GLEN R. GRELL 6 HONORABLE DUANE MILNE HONORABLE BERNIE O'NEILL 7 HONORABLE KATHY L. RAPP HONORABLE BRAD ROAE 8 HONORABLE WILL TALLMAN 9 10 ALSO PRESENT: RODNEY L. OLIVER 11 MAJORITY EXECUTIVE DIRECTOR, STATE GOVERNMENT COMMITTEE 12 CHRISTOPHER S. WAKELEY MAJORITY EXECUTIVE DIRECTOR, 13 EDUCATION COMMITTEE JENNIFER A. BELZ 14 MAJORITY LEGISLATIVE ASSISTANT, STATE GOVERNMENT COMMITTEE 15 BRIAN J. DELL MAJORITY RESEARCH ANALYST, 16 STATE GOVERNMENT COMMITTEE JOSEPH M. HURLBURT 17 MAJORITY RESEARCH ANALYST, STATE GOVERNMENT COMMITTEE 18 TRACEY ANN McLAUGHLIN MAJORITY RESEARCH ANALYST, 19 EDUCATION COMMITTEE SONIA I. TERECH 20 MAJORITY LEGISLATIVE ASSISTANT, EDUCATION COMMITTEE 21 22 23 24 25 3 1 ALSO PRESENT (cont.'d): SUSAN S. BOYLE 2 MINORITY EXECUTIVE DIRECTOR, STATE GOVERNMENT COMMITTEE 3 DUSTIN E. GINGRICH MINORITY RESEARCH ANALYST, 4 EDUCATION COMMITTEE EILEEN R. KRICK 5 MINORITY LEGISLATIVE ADMINISTRATIVE ASSISTANT, EDUCATION COMMITTEE 6 7 DEBRA B. MILLER 8 REPORTER 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 1 I N D E X 2 TESTIFIERS 3 NAME PAGE 4 SUJIT M. CANAGARETNA 5 SENIOR FISCAL ANALYST, SOUTHERN OFFICE OF THE 6 COUNCIL OF STATE GOVERNMENTS (CSG).............11 7 LEONARD M. KNEPP EXECUTIVE DIRECTOR, 8 PA STATE EMPLOYEES' RETIREMENT SYSTEM (SERS)...46 9 JEFFREY B. CLAY EXECUTIVE DIRECTOR, 10 PA PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM (PSERS)......................55 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 1 P R O C E E D I N G S 2 * * * 3 CHAIRMAN JOSEPHS: Good morning, everybody. 4 I'm Babette Josephs. I'm the Chair of the 5 State Government Committee. 6 We're doing a joint hearing here with the 7 Education Committee. 8 After I finish making a short statement, I'm 9 going to ask Representative Roebuck, who is the Chair 10 of the Education Committee, if he would like to make 11 a statement. 12 My Republican counterpart, Mr. Benninghoff, 13 is not here. He will be here in about a half hour. 14 We will note when he comes in. 15 After we finish with the statements from the 16 committee Chairs, I will be asking the members and 17 the people who are not members but are here out of 18 interest, the Representatives, to introduce 19 themselves in a sentence. 20 Thank you all for being here. 21 We are also joined by Representative 22 Paul Clymer, who is the Republican Chair of the 23 Education Committee. 24 I am happy to see you all here. These are 25 and have always been, the question of the State 6 1 pension funds and their investment practices and 2 their beneficiaries and the people who pay into the 3 State pension funds have always been of very great 4 importance, but they are now, because as everybody 5 knows, because of the economic situation in the 6 country and the world, they have become even more 7 important and there is more focus on their practices 8 and the yields and the benefits that might be yielded 9 from them. 10 We are very happy to have experts here, both 11 from the funds and somebody who will give us an 12 overview when we finish introducing ourselves. 13 And I am happy to be joined here by my 14 colleague, Representative Jim Roebuck, the Chair of 15 the Education Committee. Mr. Roebuck. 16 CHAIRMAN ROEBUCK: Thank you, 17 Chairman Josephs. 18 Good morning. 19 REPRESENTATIVE McILVAINE SMITH: Good 20 morning. 21 CHAIRMAN ROEBUCK: I'm still at heart a 22 teacher, as you can see. 23 I would like to welcome everyone here today 24 for the joint hearing of the State Government and 25 Education Committees. 7 1 Under these economic conditions that we are 2 currently going through, I think it is important that 3 we hear from experts in the field of retirement 4 pensions who can give us an overview of where we are 5 and where we are headed with our pension systems. 6 With the recent stock market decline and the 7 showing of an uphill climb in changing demographics, 8 there is a burden on our retirement systems to keep 9 up with actuarial liabilities. 10 It is our hope that today we can hear where 11 our State is and what we can do to respond to the 12 current economic climate. 13 I would also like to allow my Republican 14 counterpart, Representative Paul Clymer, to give 15 introductory remarks. 16 REPRESENTATIVE CLYMER: Thank you, 17 Chairman Roebuck. 18 And I, too, extend greetings to everyone. 19 This is indeed a very important meeting that 20 we are holding here this morning as we look at the 21 liquidity, if you will, of the pension funds, both 22 SERS and PSERS. 23 And obviously it impacts on a wide range and 24 a large number of our State employees, so we need to 25 see whether or not we're going to be able to continue 8 1 to fund these in the manner that we have in the past, 2 or will there be exceptions to the rule and we're 3 going to have to increase the funding for both the 4 State from the employees and from the school 5 districts, depending on the pension fund that is 6 being funded. 7 So again, I look forward to the testimony of 8 our experts here this morning, and thank you for 9 attending. 10 CHAIRMAN JOSEPHS: Thank you. 11 We will start, I think, here at the table 12 with the State Reps who are here. Introduce 13 yourself, please. 14 And I also would like the staff who are 15 connected with these two committees to say their 16 names as well. 17 REPRESENTATIVE O'NEILL: Good morning. I'm 18 Representative Bernie O'Neill of Bucks County. 19 REPRESENTATIVE GRELL: Good morning. 20 Representative Glen Grell, Cumberland County. 21 REPRESENTATIVE FABRIZIO: Good morning. 22 Flo Fabrizio, Erie County. 23 MR. OLIVER: Good morning. Rodney Oliver, 24 Executive Director for the Democrats, House 25 State Government Committee. 9 1 REPRESENTATIVE McILVAINE SMITH: 2 Representative Barb McIlvaine Smith from Chester 3 County. 4 REPRESENTATIVE YUDICHAK: John Yudichak, 5 Luzerne County. 6 REPRESENTATIVE TAYLOR: Rick Taylor, 7 Montgomery County. 8 REPRESENTATIVE GRUCELA: Rich Grucela, 9 Northampton County. 10 REPRESENTATIVE HARKINS: Pat Harkins, 11 Erie County. 12 REPRESENTATIVE CREIGHTON: Tom Creighton, 13 Lancaster County. 14 REPRESENTATIVE DELOZIER: Sheryl Delozier, 15 Cumberland County. 16 REPRESENTATIVE TALLMAN: Will Tallman, 17 Adams and York Counties. 18 REPRESENTATIVE ROAE: Brad Roae, 19 Crawford County. 20 REPRESENTATIVE RAPP: Kathy Rapp, Warren, 21 Forest, and McKean Counties. 22 REPRESENTATIVE GABLER: Matt Gabler, 23 Clearfield and Elk Counties. 24 REPRESENTATIVE O'BRIEN: Mike O'Brien, 25 Philadelphia County. 10 1 CHAIRMAN JOSEPHS: Oh, we have some other 2 staff people in the audience. 3 MR. WAKELEY: Chris Wakeley, Executive 4 Director of the Education Committee. 5 CHAIRMAN JOSEPHS: Anyone else? 6 Susan Boyle. 7 MS. BOYLE: I'm the Republican Director of 8 State Government. 9 MR. GINGRICH: Dustin Gingrich, the 10 Education Committee staff on the Republican side. 11 MS. McLAUGHLIN: Tracey McLaughlin, 12 Education staff for Representative Roebuck. 13 REPRESENTATIVE CLYMER: I have Eileen Krick, 14 my Administrative Assistant, Education. Eileen. 15 CHAIRMAN JOSEPHS: Okay; did we do that? 16 Did we get everybody? 17 Oh, I think Jen Belz is here from the 18 Democratic State Government staff. 19 I see Representative Conklin in the 20 audience. 21 Matt Hurlburt and Brian Dell from my staff. 22 All right; we're Ready, and we're not even 23 terribly late. 24 The first person we are going to hear from, 25 who will give us an overview on trends in pensions 11 1 around the States, is Sujit CanagaRetna from the 2 Council of State Governments, Southern Office. 3 Mr. CanagaRetna, please proceed. 4 MR. CANAGARETNA: It is a great honor to be 5 here this morning, and I thank Chairman Josephs and 6 Chairman Roebuck for extending this invitation to me 7 and to the Council of State Governments. 8 While I work for the CSG's southern region, 9 the Southern Legislative Conference in Atlanta, 10 Pennsylvania is served by CSG's eastern region, the 11 Eastern Regional Conference, located in New York 12 City. 13 I have with me my colleagues, 14 Wendell Hannaford, who is the Director of the ERC, 15 and Mike Jackson, also who works at the ERC. 16 And I know a number of Pennsylvania 17 Legislators are active with the ERC, and we do 18 appreciate their support and involvement.