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States must keep pledges

February 26, 2003

Be careful about the promises you make, because you just might have to keep them, as lawmakers from two states found out this month. Pennsylvania and West Virginia officials face some tough choices to deal with their states' financial obligations.

In Pennsylvania, it's the state's pension systems for state officials and teachers that are causing the pain. For the past several years, both funds' investments have not done well because of the stock market's difficulties. And then there was the Legislature's recent decision to increase benefits for all retirees, including state lawmakers.

Now the bill is coming due, and unless there's a dramatic turnaround on Wall Street, the amount contributed by the employer - in truth, the taxpayers - will have to increase.

State Treasurer Barbara Hafer told The Associated Press that the system has a year to watch its investments before drastic action will be necessary. We'd bet most taxpayers would rather see a plan now than pinning all hopes for a solution on a stock market surge.

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Waiting for a year is not an option in West Virginia, where the Workers' Compensation Fund is losing $275,000, for a projected loss of $100 million for the current fiscal year.

The system has less than a third of what it needs to cover payments due to injured workers, but premium increases and proposals to increase taxes on payroll, workers' salaries, cigarettes and soda have all been ruled out, at least so far.

Dale Newell, the system's executive director, promises that reforms can save the system $130 million a year, but will take 18 months to put in place. In the meantime, Newell is $345 million short of balancing his budget this year.

The one thing the Legislature should not do, as some Senate bills propose, is to borrow cash from its $1 billion investment pool to meet current expenses. If the stock market rebounds dramatically, both states will get some breathing room, financially speaking. Until that happens, both need better plans to help them keep their promises.

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