Ray Clarke Provides Notes from TESD School Board Meeting & Budget Approval Process

My friend, Ray Clarke once again has not let us down with his detailed notes and commentary from the TESD School Board meeting.  Posting the agenda from last night’s meeting, I noted its 101 pages so I have a feeling that last night was long and tedious.  Which makes me all the more grateful that Ray attended, took notes and then provides us with his thoughtful remarks.  Thanks Ray!

I was particularly interested to know that PSERS was discussed at the meeting.  The large white elephant in the room, we’d all like to hope that PSERS goes away or somehow just self-corrects but we know that’s just wishful thinking. PA House Appropriations Chair Dwight Evan’s proposed legislation addresses PSERS, but appears to be a delay tactic where the major liability to the taxpayers remains.  But I suppose one could say his bill is better than nothing . . . which is where we currently are on the subject. 

At the end of Ray’s notes he asks for State House candidates Drucker and Kampf to weigh in, but my experience says that will be doubtful.  Unfortunately, my discussions with politicians anymore seem to be laced with an ‘it’s off the record’ remark . . . but maybe these candidates will surprise us! 

Read over Ray’s comments from the meeting and please provide your thoughts. Any other readers attend the meeting, if so,  please weigh in with your comments.

The School Board passed:

  • The 2010/11 budget with a 2.9% property tax increase, as developed and communicated over the past six months
  • Issuance of $23.6 million of bonds at “record low interest rates” – but which will still cost $36.7 million to repay over the next 15 years.  Part will be used to advance refund existing bonds, which will save $170,000 next year and have a total net present value savings of $377,000 over the next dozen years.  Note that the savings are front-loaded, extra costs come in the out years (see later, re PSERS……)
  • A bid to demolish the ESC, leading to a total project cost of $450,000 – about half the working estimates, which is very good news.  The work to take place at the end of the calendar year.
  • Modifications to the K-6 class sizing practice that will save three teaching positions next year and more later, while remaining in accordance with current staffing policy.  The implementation enabled by more recent resignations than expected.
  • A bid for printing services to replace the print shop currently housed in the ESC.  Important to note that the budget strategy to save $84,000 did not explicitly articulate the $52,000 cost for the outsourced services, although apparently that cost is included in the budget.  There was an agonizing 15 minute discussion while the Board and Administration talked all around this without facing up to it.

Interesting update about PSERS: PA House Appropriations Chair Dwight Evans has introduced a bill to implement a Rendell plan to delay the increase in employer (= taxpayer) contributions to teacher and state employee pension plans.  Basically this limits the rate of increase of contributions via “collars” on the percentage of payroll that the taxpayer would have to contribute.  Here’s an analysis: 
http://www.paindependent.com/todays_news/detail/alternate-state-pension-plan-would-cost-8-billion
From some of the numbers floated, I guess this would provide TESD with at least a $5 million annual expense saving (vs the current forecast) in the problem years coming up.

But of course, the liabilities are still out there, so, to quote another website:
http://www.pennsylvaniavotes.org/forum/forums/p/149/300.aspx#300:
“An actuarial note attached to the bill by PERC (the PA Public Employee Retirement Commission) estimates that the higher costs in later year will far outweigh the contribution reductions in earlier years – to the tune of an astonishing $52 billion over 30 years. That is an additional $52 billion that taxpayers – through higher state and school property taxes – will have to fork over to pay off the pension obligations, and this assumes an 8% annual return on investment.”

This bill is being compared to refinancing a mortgage, which is not a bad analogy.  Continuing with that: the plan does of course completely fail to address the fact that the principal (the public sector pension liability) vastly exceeds the market value (= pensions valued at private sector levels).  Not a thought being given to writing down that liability!

For how long will voters put up with the union stranglehold on the legislature?  At some point the economic pain will become overwhelming.  What do our current and would-be representatives think about this?

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14 Comments

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  1. I was unable to attend the meeting so I very much appreciate Mr. Clarke’s notes/comments from last night. I’ve been watching the PSERS from the sideline and the kind of taxing required from residents to fund the teachers pension has me really scared. I’m nearing retirement in a few years and I wish I had that kind of pension plan!

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  2. Pattye
    It is important to point out that any changes to PSERS must come from Harrisburg and the State legislature.
    It is also important to point out that it is not only PSERS that has a problem – but the state employees plan is also in the state of affairs – but since that plan does not impact local taxes it receives no attention at all – just the teachers get blamed.
    Once again i want to say that all state retirement systems should be changed from a defined benefit plan to a defined contribution style program for all new employees in order to slow the bleeding.
    So the message needs to be – stop beating up our local teachers on this issue and have the attention and ire directed towards Harrisburg. But if our elected officials can not come to an agreement on the use of hand held devices while driving – a relative no brainer – why would they attempt to do the right thing for all taxpayers and correct the retirement programs for ALL State employees – might it be the ballot box…

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    Anon Reply:

    Look no further than Drucker’s contributors to his campaign to see which side he falls on.
    PSEA PACE has already given him $2,500

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    chet Reply:

    Paul has gone on record re: teachers union…

    can you elaborate? Thanks

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    Anon Reply:

    In other words, Drucker is on the side of the union, not the taxpayer.

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    Anon Reply:

    Wow, you really cracked the nut there John. Sam Pilotti gave to both candidates. Why would he do that? Could it have something to do with him covering his bases, he does after all own several properties in the township. In fact, doesn’t Drucker rent his office space in Paoli from him?
    Where are all the cries of ‘pay to play’?
    If you want to pretend that Drucker is not in the pocket of the unions, be my guest.

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  3. So you are saying the teachers are just the benign beneficiaries of the largess negotiated by their union leaders. How innocent! Watch them revolt when reality sets in, IF it ever does. They should be quiet… they currently have it made!!

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    Chet Reply:

    benign beneficiaries was a sarcastic remark. Of course they are not that.

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  4. Dear Anonymous,
    I realize the PSERS pension plan seems extravagant, and when considered in today’s financial climate, it can come across that way. However, to sit near retirement and “wish” you had a pension plan like this is not what teachers do; turn the clock back 40 years and commit to a profession like teaching, and this could have been you. But back to the pension…I have done the math myself, and it’s not so extravagant. Teachers are required to contribute 7.5% of their own salary each paycheck. For this, when they retire, they will get a paycheck for the prescribed benefit period. Guess what…if you do the math, squirrel away 7.5% a year for 40 years, figure a reasonable long term return, and invest it in an annuity or some other payout mechanism, and you have most of what PSERS pays out to retired teachers. The difference is they guarantee it (theoretically at least). Compared to private industry, where it’s common practice to share contributions to 401(k) plans to a percentage, etc, and it’s not that luxurious; it’s largely self-funded. Plus, sure, our teachers are paid well…for teachers. But while they start with competitive salaries, to be at the absolute highest point possible in your profession and have a salary cap around 100k isn’t so great. I realize people gasp when they think of a teacher being paid six figures, but get real folks – most of us couldn’t focus 10 minutes in a room with 20 kids, let alone control them, get them to focus, and…LEARN! How many of us would commit to Masters or PhD programs with such limited potential return on our investment! I realize there are problems with their system, as with most quasi-governmental or unionized industries. I don’t think most people understand how challenging teaching is as a profession – let alone not having the flexibility to even pee when they need to.

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  5. Grant said, “if you do the math, squirrel away 7.5% a year for 40 years, figure a reasonable long term return, and invest it in an annuity or some other payout mechanism, and you have most of what PSERS pays out to retired teachers.”

    No No No!

    We have first hand evidence that the above statement is wishful thinking. Even with 20 year average historical taxpayer contributions above teacher contributions (9.5% vs. 6.2%) we know PSERS is woefully underfunded. I’d invite our poster Mr. Grant to show us his math.

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    Parent in PA Reply:

    Don’t forget the change in the program with a 25% increase in benefits without anyone even negotiating…2% per year changed to 2.5% per year…no cap.

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  6. Grant
    I appreciate your expanding the general information about teacher pensions. I have heard many teachers attempt to make the same points. And I believe you are right on when you point out that the pension expectations were always part of your compensation package….

    Now I want to try to expand why anyone would say it’s very generous.
    1)The biggest and most obvious issue with the pension program is the “recent” change from 2% to 2.5% per year for years of service. When you took the job 40 years ago, you expected an 80% pension. In fact, you will get 100% pension. Work more than 40 years and that number continues to go up. ( And it is not taxed as income in Pennsylvania, though pensions never are).
    2) The pension is a defined benefit, not a defined contribution. So while your point about an annuity is accurate, 7.5% a year for 40 years would have been subject to the rise and fall of “guaranteed benefit” values. I have an annuity that is 10 years old — the initial contribution was $50,000. At one point it was worth twice that, and now is worth $60,000. The legislature has never done anything but what the social security system does — look at what comes in and pay out accordingly. The pensioner has borne no risk.
    3) In TE at least, the educational effort to advance your degree is heavily reimbursed — so you have an employer paying for you to get the credentials to get a bigger paycheck.

    4) Every contract you negotiate is heavily affected by the subtext of “right to strike.” The parents cannot come in and staff the buildings in your absence — and you do not lose a dime of salary if you have a work stoppage. It’s not collective bargaining — it’s “here’s what we want and we want to see if you dare to say no.” The more heavily the local leaders rely on Harrisburg for their direction, the less district-sensitive the contract terms are.

    Here’s the final comment: most people do not understand how challenging teaching is. But teachers do not realize how “secure” that kind of career is either. Start at 22, put in your 2+ years to tenure, work 40 years and cash out with 100% pension (average of final 3 years of work) with 40 years of contract increases…work hard, but have the option to work to a contract as you always have at least a few marking periods to pull it together if you lag. Take summers off — or get paid to do curriculum development and go to meetings — or have a summer “career” and run a camp….cash out sick days (based on your current agreement) — or take your 12 sick days a year (10?) if your contract doesn’t call for cashing them out….
    And unless you have seriously poor skills, and egregious behavior, you get to keep your job with little risk for your whole career. Like anyone else in society, you can change careers if you don’t like it — or want the flexibility to pee when you need to — or you can give up some of the riches other people apparently have by taking a very secure path.

    Oh — one last issue: your union negotiates on behalf of every teacher whether or not that teacher wants representation. And the people you negotiate with — you teach their kids.

    Teachers are fabulous — but no more fabulous than anyone else that decides to get up every day and go to work. I’ve done the math too — it’s a pretty good deal over a lifetime….because while the early years are not lucrative, and the max out seems “average” for someone with a PhD, a lifetime of that income is a pretty amazing life benefit. Expecting “more” every negotiation is what has to change.

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  7. “What does it all mean?? Who knows… Sam Pillotti, a good card carrying Republican, has made his choice:”

    John —

    the same report also shows monthly rent payments to Metric Realty — Mr. Pillotti’s real estate firm.

    Perhaps Mr. Pillotti, a good card carrying business owner, is making a more pragmatic gesture?

    I am sure you will say, “No” but just a different point of view.

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  8. John —

    Don’t know how to make this any more clear to you: I am NOT a TTRC member. I know you will continue to believe otherwise, but all I am is a committed Republican who lives in the West.

    I, by the way, have no issue with Joe Tarantino’s contributions to Democrats — it seems they, too, fall under the pragmatic businessman category.

    I have no more issue with Kampf’s donors supporting him than I do with the Trial Lawyers making Drucker their biggest beneficiary in the Southeast. It’s called politics, John, and like-minded groups/individuals donate to like-minded candidates.

    I know you understand this but, because it doesn’t help you attack Kampf, refuse to admit in this case.

    Basically, I wrote this for the edification of all other readers because I know you will continue to believe I am who you want to believe and that standard political contribution patterns are evil when it comes to the candidate you continue to defame at every turn.

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