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Standing in at 5 tall, Diana Irey Vaughan isnt what youd expect in a erce champion of scal responsibility and good government. But for nearly two decades, she has proven herself as a scal watchdog in southwestern Pennsylvania and led the charge for reining in waste and excessive public spending. In the following pages, learn about Dianas plan to preserve and responsibly grow Pennsylvanias future.
Recently, the U.S. debt hit the $16 trillion mark. Rather than chart a more responsible course for taxpayers in the Commonwealth, Pennsylvania followed Washingtons lead by recklessly increasing our state debt over the last Our state and local decade. During his two terms debt is now in ofce, Governor Ed Rendell $38,000 per family increased Pennsylvanias general and growing. obligation debt by 28%, even in the face of economic recession - Commonwealth Foundation and a shrinking private sector.1 Our state and local debt is now $38,000 per family and growing.2 Add this to our growing pension obligations, and today, Pennsylvania nds itself in a very deep hole. In just a few short years, Pennsylvania has gone from a pension surplus to a system under threat from ballooning unfunded liabilities. We are already behind in funding our long-term pension promises by a whopping $40 billion, and the gap is widening. Soon, state and local taxpayers will be on the hook for a $4 billion payment into the states public pension system that we simply cannot afford. Our mounting debt puts every Pennsylvanian at risk. Eventually, debts come due, and well have to pay them, whether to our retired state workers and teachers or to other creditors. Our state leaders have a responsibility to take action now to avoid piling on more nancial burdens for our children and grandchildren.
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In 1999, Pennsylvanias pensions were 120% funded. Eleven years later, PA pensions plunged to 75% funded, below the 80% funding level considered a healthy benchmark.3 Today, the Public School Employees Retirement System (PSERS) is only 69% funded.4
Source: State Fact Sheet, The Trillion Dollar Gap, Pew Center on the States, 2010.
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Incumbent treasurer Rob McCord once wrote that if your credit card bills are getting out of hand, the last thing you should do is ask the bank or credit card company to increase your line of credit. Unfortunately, this is exactly what Rob McCord did just a few months before he penned these disingenuous words of advice to Pennsylvanians. In 2010, Rob McCord approved lame-duck Gov. Ed Rendells request for $600 million in additional debt spending despite the governors already record-breaking debt increases. Under Rendell, the Redevelopment Assistance Capital Program (RACP) debt limit increased ve different times and grew by an astounding 279% over his eight years in ofce. By law, debt limit increases must be approved by either the auditor general or the state treasurer. Although Auditor General Jack Wagner spoke out ercely against the move, McCord still signed off on a record debt level of more than $4 billion. As a result, the McCord-Rendell team was able to support pork projects like $10 million for the John P. Murtha Center for Public Policy and nearly $2 million for the Arlen Specter Library.
Fiduciary [-doo-shee-er-ee] noun, adjective One that stands in a special relation of trust, condence, or responsibility American Heritage Dictionary
Our treasurer is the states duciary, with the responsibility to safeguard Pennsylvanias nancial assets. The treasurer has a constitutional role in deciding when Pennsylvania increases its debt and is the only statewide elected ofcial to serve on both the PSERS and SERS boards. Our treasurer should be an outspoken champion for sound investment policy and meaningful reform. The race for state treasurer is about much more than making smart investments for Pennsylvania; its about leadership and courage. Diana Irey Vaughan will be the strong voice Pennsylvanians need now to restore a common-sense, back-tobasics approach in the ofce of state treasurer. Read more to nd out about Dianas back-to-basics plan to address Pennsylvanias long-term liabilities.
Dianas Plan
Americans hold 8 million fewer credit cards than they did a year ago, because they understand that debt is a bad thing. Its time that state government listened to the public. -Auditor General Jack Wagner, press release, December 9, 2010 1. Decrease our debt 2. Simplify our investments and eliminate high fees 3. Responsibly fund our pensions
Are taxpayers paying too high a price for its growing debt?
Pennsylvania taxpayers currently spend more than $1 billion a year on debt service. That is $1 billion of taxpayer money each year just to pay for past debt and reckless borrowing. It means less of our government dollars are going to vital services our citizens depend on daily. Over the past decade, Pennsylvania debt service payments have increased at a staggering rate. In homes all around the Commonwealth, Pennsylvanians already know that nance charges on credit cards and bank loans can quickly eat away at family budgets necessary to pay for mortgages, utilities, and food. We need our government leaders to understand this, too. It is irresponsible to take on more debt and to increase the costs of paying for it during lean economic times. In the long-term, endless borrowing is simply unsustainable.
Estimated impact of RACP reforms from HB 2175 from House Finance Committee (R).
According to data from the Index Funds Advisors, Inc., a simple index portfolio would have outperformed SERS over the past 12 years. Despite lackluster performance, Pennsylvania pays steep management and performance fees annually for SERS and PSERS. In fact, over the past ve years, PSERS paid out a whopping $1.35 billion in management fees, in large part to fees associated with alternative investments like private equity, venture capital, and real estate.7 The Pennsylvania state retirement system, which has about 46% of its money in alternatives, paid those managers 77% of the systems total $195 million in fees last year. - The New York Times, April 2012
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See http://www.ifa.com/portfolios/ for detailed index portfolio information. Creswell, Julie, Pensions nd riskier funds fail to pay off, The New York Times, April 1, 2012.
Unfortunately, Pennsylvanias recent history has not been one of scal discipline. Rather than preserve a once existing pension surplus for a rainy day, Harrisburg lawmakers increased benets for themselves and state employees, gave cost-of-living increases, and made little to no employer contributions into the funds. These actions left no room for error when Pennsylvanias pensions were among the hardest hit of all the nations pension funds during the 2008-2009 market crash, sustaining losses of 28.7% (SERS) and 26.5% (PSERS) that year.8 No longer able to rely on investment returns to fund the state contribution into our plans, state leaders renanced Pennsylvanias pension obligations over 30 years and legally capped employer contribution rates to avoid payment spikes, passing the brunt of this debt onto future generations of taxpayers. This issue is now boiling to a crisis with a recent downgrade of Pennsylvanias rating by Moodys Investors Service due to lack of leadership in addressing our growing unfunded pension liability. It now will cost taxpayers more when Pennsylvania borrows money.
His best explanation for being absent from this debate: Rob McCord is one of eleven votes on the State Employees Retirement System and one of fteen votes on the Public School Employees Retirement System.--McCord spokesperson to the The Daily Review, June 5, 2012
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Pew Center on the States, Trillion Dollar Gap: Underfunded State Retirement Systems and the Roads to Reform, February 2010.
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Its no secret that Rob McCord is eyeing a run for Governor. With thousands of dollars in contributions already from public employee and teacher unions, its no surprise that Rob McCord has remained virtually silent on these critical issues as he prepares for the next campaign. Finding real solutions to our growing debt and pension burdens doesnt need a treasurer who is playing politics; it needs a treasurer who will do whats right for Pennsylvania.
She did it for Washington County, and now, shes ready to do it for all of Pennsylvania.
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