One of our neighbors, the Downingtown School Board recently approved a resolution that calls for the state to change Pennsylvania Public School Employees Retirement System (PSERS). Driving their decision is the predicted dramatic increase in PSERS contribution from school districts. Looking ahead to the upcoming years, the teacher’s pension increase will greatly affect the school district’s budget and then the taxpayers.
According to one of the Downingtown School Board members, their PSERS contribution is going from a little over 4% to about 31% in 2012! School Board member Robert Yorcyk, who introduced the resolution to the other board members explained, “Considering that salary and benefits make up about 70 percent of the budget, the increase to 31 percent would represent about 15 percent of the budget or half of what we have left to support education.” The Downingtown School District pays about $4 million in teacher pension contributions – that number will rise to $7 million in 2011 and by 2014-15 retirement contributions are expected to hit $36 million! The school district estimates that in just 5 years, PSERS contributions will increase nine-fold.
If I understand the PSERS plan correctly, employees and employers alike contribute and that money is then invested, . . . the pension payout is guaranteed (regardless of the market economics). The real problem is that due to the volatility of the market, school districts are being forced to pay larger pension contributions because the pension investments have not kept pace with what is guaranteed in the payouts of the pensions.
The state House of Representatives is reviewing changes in the PSER bill. The new plan would actually put a cap on the school district contributions. If the pension payout required additional funds, the bill would require the state to be responsible for the difference. The Downingtown School Board signed their recent resolution to urge the state to lessen the burden on taxpayers and the school district (understanding that the teacher benefits will remain the same).
Should the Tredyffrin Easttown School District take a similar stand? Should our school board members be encouraged to follow Downingtown’s lead?
Pattye:
The TESD Board has already stated (but not formally resolved) that they are banking on a state bail out of their PSERS obligation. (That is: for the state to pay even more than the half of the liability they already pay). And given the union power in Harrisburg, I’d say that’s a pretty good bet.
The key question is: is there any chance of evolving the plan to the defined contribution type experienced by the rest of today’s working world? Or will we be stuck for perpetuity with an increasingly underfunded entitlement in a low return, “new normal” world?
(Yes John, we know you think the TTGOP political machine runs T/E….)
The problem here is that PSERS is a state mandate to begin with. Local districts can’t legally negotiate any other pension system for teachers. Since this is a problem created by the state (and the unions) it’s perfectly consistent to demand the state (and the unions) resolve it.
I agree. But I think it is prudent that TESD has funds designated in reserve to help diminish the spike. If you go on the PSERS website, you can read a power point presentation from December that illustrates the issues and options.
John, I took your advice about ” keeping my powder dry”! I would like to treat you to lunch sometime. I would love to talk to you off the boards. Let me know if your interested.
Perfect!
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Sorry I couldn’t resist, I love that place.