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Pension reform, layoffs in Pennsylvania proposed budget

By Mark Shade

HARRISBURG, Penn. (Reuters) - Pennsylvania Governor Tom Corbett asked the state's Republican-led legislature on Tuesday for pension reform, layoffs, transportation investments and a $90 million increase in basic education funding in his proposed budget for fiscal 2014.

The Republican governor's $28.4 billion blueprint, if approved by lawmakers, is $679 million, or about 2.4 percent, higher than the current budget and includes no tax increases.

Corbett said he will not expand Pennsylvania's Medicaid system under federal healthcare reform because it lacks flexibility and would be too expensive to implement.

He also proposed 400 layoffs in part by consolidating state health centers and by closing New Castle Youth Development Center.

Pennsylvania's constitution requires a balanced budget to be adopted by June 30.

Without pension reform, employer contributions in the state's two pension programs - the State Employee Retirement System and the Public School Employees' Retirement System - would balloon from their current 11.5 percent and 12.36 percent, respectively, to around 30 percent in five years, Corbett said.

His proposal would not affect any benefits already accrued by current employees, nor will retirees lose any benefits. But new employees would be automatically enrolled in a 401(a) plan that would require them to contribute at least 6.25 percent of their salary.

Pension costs are on track to eat up most of the state's available revenue growth, Budget Secretary Charles Zogby said at a media briefing before Corbett's address.

"We would have to go into the general fund, without reform, and make deep cuts," Zogby said.

His budget also seeks to boost transportation funding. He proposed gradually removing the cap on a state tax on wholesale oil distributors, which could generate $5.3 billion over five years if approved.

The new revenue, the governor said, would help pay for road, bridge and other transportation infrastructure improvements.

And in keeping with announcements in the weeks leading up to his budget presentation, Corbett said he wants to privatize the management of the Pennsylvania Lottery, sell the state's liquor stores, and provide nearly $15 million to train about 300 new state police troopers.

(Reporting by Mark Shade; Editing by Hilary Russ and Andrew Hay)

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