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Pennsylvania governor again urges pension reform as budget gap looms

By Hilary Russ

(Reuters) - Pennsylvania Governor Tom Corbett has renewed calls for pension reform as state lawmakers consider how to close a budget gap with just two weeks until the start of the new fiscal year.

The state is facing a shortfall of at least $1.5 billion for Corbett's proposed $29.4 billion budget for fiscal 2015, according to some estimates. Pennsylvania has about $50 billion of unfunded long-term pension liabilities.

"We need you to act and we need you to act now," Corbett said during a televised news conference on Tuesday.

Last year, Corbett introduced a bill that would have scaled back increases in pension contributions from the state and Pennsylvania's school districts. The Republican governor estimated that could have saved $175 million in fiscal 2014 and helped ease budget pressures.

But that would also have widened the gap. To offset those reduced contributions, his previous plan would have cut future benefits for current employees - something likely to be challenged in court - and moved new hires to a 401(k)-style plan.

There was "no willingness in the legislature to deal with that," Corbett said on Tuesday.

The governor also said he would work beyond the June 30 budget deadline in order to finish it.

Republican State Representative Mike Tobash has introduced pension reform legislation this year. His plan would move new hires to a hybrid retirement plan, a 401(k)-style plan blended with a traditional defined-benefit plan.

Corbett is up for re-election this year and has been polling poorly among potential voters, in part because they feel he has cut funding to education.

He also renewed calls on Tuesday for another initiative that didn't make it through the Republican-led legislature last year: privatizing state-run liquor stores in a deal that he said would generate $1 billion and could be used to fund public education.

State lawmakers are currently negotiating possible changes to the liquor system, including allowing the sale of wine and beer in grocery and convenience stores.

Pennsylvania and Utah are the only two states in the nation with full state control over their liquor sale systems, owning and operating retail and wholesale operations.

The Pennsylvania Liquor Control Board is the largest purchaser of wine and spirits in the United States. The state has an 18 percent liquor tax.

Corbett refused to address tax hikes or other revenue raising measures on Tuesday. He has opposed a tax on natural gas extraction.

(Reporting by Hilary Russ in New York; Editing by Jonathan Oatis)

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