Pennsylvania Gov. Tom Wolf vetoed a pension reform bill Thursday that aimed to improve the funding, sustainability and fiscal responsibility of the state's two largest pension funds.

The bill proposed that all new state and public school employees to be enrolled in a mandatory defined contribution plan, as well as offering an optional cash balance plan.

S.B. 1, sponsored by state Sen. Jake Corman, passed the Pennsylvania Senate on May 13 by a 28-19 vote and passed the state House of Representatives on June 30 by a 106-89 vote.

“I understand the need for pension reform, but this legislation provides no immediate cost savings to taxpayers and does not maximize long-term savings for taxpayers,” Gov. Wolf said in a news release.

Gov. Wolf added that the bill also doesn't address “the over $700 million in fees paid annually to Wall Street firms” to manage the state's investments.

The $51.7 billion Pennsylvania Public School Employees' Retirement System and $27 billion Pennsylvania State Employees' Retirement System, both based in Harrisburg, together have an unfunded liability of $60.1 billion.

Under the bill, employee contributions for current participants would have increased by 3 percentage points to 9.25% for PennPSERS and 2.5 percentage points to 7.5% for PennSERS. Current employees would also have been eligible to contribute up to 3% of payroll into an optional cash balance plan.

“This legislation produces no savings to our deficit in the next fiscal year,” Gov. Wolf said in the news release. “We need a comprehensive agreement on the issues facing Pennsylvania,” which includes pension reform.

“We applaud Governor Wolf for vetoing a misguided and destructive pension proposal that would only hurt Pennsylvania taxpayers, public employees and the entire state's economy,” said Bailey Childers, executive director of the National Public Pension Coalition, in a statement. “The Republicans' plan will cost taxpayers in the long run and likely increase — rather than reduce — the state's pension debt.”

James Comtois write for Pensions & Investments, a sister publication of Business Insurance.