Pennsylvania's Independent Fiscal Office, a state agency, released a long-term outlook for the Keystone State's budget that shows pension costs rising sharply to consume nearly 10 percent of state government's general fund within five years. The office calculates that revenues will rise slowly amid a stagnant economy, part of what one official with the IFO calls the "new normal," while pension costs rise on average by $500 million annually for the next several years. Employer contribution rates, which dipped below 5 percent from 2000 through 2006, will soar to me than 25 percent in coming years. The biggest growth in pension expenses will be the state's share of contribution to public school employee pensions. Even these growth rates are contingent on the state's pension funds hitting their expected investment rate of 7.5 percent annually. Otherwise, costs could grow more rapidly. (click image to expand chart)
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