Pennsylvania governor won't sign budget over lack of pension reform

By By David DeKok

(Reuters) - Pennsylvania Governor Tom Corbett said on Monday that he would not for the moment sign a $29.1 billion budget enacted by the legislature because lawmakers had failed to include pension reform. Corbett, a Republican with sagging poll ratings who is up for re-election this year, wants to push new state employees onto a so-called "hybrid" pension plan.

Under his proposal, the first $50,000 of employee income would qualify for the existing, defined benefit pension plan, while anything above that would feed a 401(k)-style defined contribution plan. But for the second consecutive legislative session, Corbett failed to muster enough support to push through his idea. His proposal to privatize the state-run liquor system also fell short for a second year. "The budget I received tonight makes significant investments in our common priorities of education, jobs and human services," Corbett said in a statement.

"It leaves pensions, one of the largest expenses to thecommonwealth and our school districts, on the table." The state was facing a shortfall of at least $1.5 billion, according to some estimates. Pennsylvania has about $50 billion of unfunded long-term pension liabilities. To close the gap without raising taxes, the spending plan includes a controversial measure for one-time transfers of money from dedicated funds, such as one that helps volunteer fire companies purchase equipment.

Corbett has 10 days to sign or veto the bill or it becomes law without his signature.

His decision appeared to take lawmakers by surprise as he had earlier said only that he was considering the budget bill's impact on Pennsylvanians.

Earlier on Monday, the Pennsylvania Senate unanimously approved a token pension reform plan moving themselves and other state elected officials - but not state employees or teachers -into a 401(k) plan. The bill now moves to the House.

Republican lawmakers had praised their budget for increasing overall education spending by $316 million while not raising taxes. Democrats, none of whom voted for the budget in either chamber, condemned the failure to tax shale gas extraction and the lack of more education funding.