TESD School Board Member Kevin Mahoney Says District Budget Could be 15% Over Budget in 2 Years if Pension Contribution Rates Don’t Change

Interesting article in Daily Local newspaper by Dan Kristie (see below).  TESD School Board Member Kevin Mahoney says the school budget could be 15% over budget in 2 years if the pension contributions rates don’t change.  According to Mahoney, the only way to deal with the increasing pensions costs is to pass a large real estate tax increase!  Comments . . .

Retirement System’s Cost to Rise Dramatically Soon

 By DAN KRISTIE, Staff Writer

This is a dramatic increase, considering the district’s 2010-11 budget was $203 million and 60 to 70 percent of the district’s expenses are dedicated to salaries and benefits — a percentage that, because of contractual obligations, is difficult to reduce or change.

Schools across the state are facing similar increases in their retirement system contributions, and their budgets are similarly constrained.

School officials in Chester County expect the state Legislature will — somehow — adjust the retirement system so the increases will be less dramatic. But even if reforms are implemented, the retirement system remains dramatically underfunded. Local officials doubt any state-level solution to the PSERS crisis will save their own school districts from all the retirement system-related pain.

Officials are reluctant to speculate about what will be on the chopping block once the increased retirement system contributions come into effect. The consensus, however, is that if the increases are anywhere near as large as projected, educational programs will be affected.

Kevin Mahoney, the chairman of the Tredyffrin/Easttown School Board finance committee, said that if required PSERS contribution rates do not change, his school district in two years will be 15 percent over budget.

This will be the case, Mahoney said, even if Tredyffrin/Easttown sees no other cost increases except for a small increase in the cost of benefits. Mahoney added that the district is required by law to pass a balanced budget.

“You can only do that by increasing class size or eliminating curriculum choice,” Mahoney said. The other way for districts like Tredyffrin/Easttown to deal with the increased PSERS rates would be to pass a large real estate tax increase.

Act 1 is the state law that limits how much school districts can raise property taxes. Act 1, however, allows districts to exceed the limit in order to cover mandated pension contributions. Act 1 also allows districts to hold referendums if they seek to raise taxes beyond the limit.

Local school officials said Act 1 taxpayer referendums are extremely unlikely to pass in Chester County, given the economic climate and the mood of the electorate here. And, officials said, school districts would be unlikely to try to use Act 1 exemptions to pass the PSERS increase off to taxpayers.

“[The West Chester Area School] board has made it pretty clear we’re not taking exceptions,” said Jim Davison, the chairman of that school board’s finance committee. He added that the electorate in West Chester Area would never go for a referendum.

“I have no confidence in a referendum passing in this district,” Davison said. Davison, like Mahoney, said he believes his district’s educational programs could be in jeopardy if the state doesn’t reform the retirement system. He said, however, that West Chester Area will try to make other types of cuts — to facilities budgets and energy use, for example — and hope for the best from the state-level retirement system reform effort.

“But I don’t know if we can make enough of those types of cuts so we don’t impact the classroom,” Davison said. “That’s the million-dollar question. We may end up impacting the classroom — increasing class size, getting rid of programs.”

Bill Fagan, the chairman of the Downingtown Area School District finance committee, used the metaphor of a series of concentric circles to describe how the retirement system crisis might affect his district. “When you look at the concentric circle with the children in the middle, the farther out you get from that circle, those are the types of programs … more likely to be cut,” Fagan said.

Fagan said he was unwilling to speculate about precisely what type of programs would fall on the outer circles. But, he said, he hoped Downingtown Area could deal with the PSERS crisis without negatively impacting the classroom.

The state legislature in July voted to reduce the 2010-11 retirement system employer contribution rate from 8.22 percent to 5.64 percent, meaning school districts will be required to contribute less than expected this year to the fund.

Local officials said that, in the absence of other action, this only delays the retirement system crisis. “The state has been unwilling to change the benefit program,” Mahoney said. “We keep seeing this ski slope curve in front of us, and whenever we get close to it the state has changed the discount rate, which just makes the curb steeper but farther away.”

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  1. This is no surprise.

    I would like to see them institute an activity and or/ use fee. This makes those families who have current students take some of the extra burden from the remainder of the residents who do not have students in the schools. Nothing overboard, but something to close the gap.

    I would also like to see exceptions taken so that taxes can be raised in small increments. Not one large sum all at once. It would have been nice to have that happen over the last few years, but ‘poor economy’ prevailed over that argument.

    The district has been proud to not raise past the act 1 cap for years. However, inflation rates have exceeded those caps so this was bound to happen, PSERS or not. PSERS is just the evil monkey in the closet.

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  2. It demonstrates once again that the legislature doesn’t want to own a problem they created so they push the burden down to the school boards. Harrisburg needs to fix the problem.

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  3. The only real fix is to change the pension system for new hires and possibly for current enrollees (maybe 15 years from retirement?) to a defined contribution plan.

    Defined benefit plans (like they work on now) were established when salaries weren’t that strong compared to the rest of the working world; today, that situation no longer exists and teachers/public employees make very competitive salaries.

    This spring, the Legislature patted itself on the back for averting the crisis, but all they did was push the problem off to another time — all while the problem continues to get worse (a problem they created.)

    The problem started when the politicians paid/bought off the special interests (teachers’ union / state employees) and helped themselves with a pension increase when the economy was booming. As usual, it was a short-sighted move made with no concern about 5, 10 or more years down the road.

    A lot of the same legislators are in Harrisburg and they should rollback the increase…at least for themselves if not for everyone (again, maybe a roll-back dependent on how close to retirement others receiving the pension are?)

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    Kevin Grewell Reply:

    The idea of a rollback of the increase in the pension multiplier came up for discussion at our annual legislative breakfasts (attended by board memebers, school administrators, and state representatives and senators) seveal times during the years I was on the school board (1999-2007). Pete Motel tells me it still comes up, including this year. (He has repeatedly asked them to change it back)

    The idea never goes anywhere. It seems to be a given that our affluent tax base should be able to just bear up endlessly. More recently, you hear that it is not “legal” to change it back. Apparently you can only increase the multiplier, never decrease it!

    Over the years, I have been very critical of Harrisburg, including opposing Act 1 of 2006 and speaking out about the coming pension crisis, among other things.

    To be fair, I would point out that I always thought Carol Rubley was a bright spot, but one person does not a legislature make. Also, it should be noted that Paul Drucker was not in H-Burg when the pension was increased or when Act 1 was passed (I think he was elected in 2008) although it is certainly fair to ask him what he thinks should be done about it now.

    Finally, school board memebers (including myself) have written many letters, and have spoken out at a number of public forums, including Town Hall meetings and PSBA (Pennsylvania School Board Association) legislative forums, on issues of school funding, Act 1, the PSERS crisis, and the need to repeal or fund unfunded mandates.

    The legislators know very well what the issues and problems are, and they have done nothing. Bottom line – they will take real, effective action ONLY when lots of citizens wake up and start to push them.

    There is a silver lining to this dark cloud – tax increases and cuts to the educational program may eventually motivate enough people to get involved.

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  4. Why is this a surprise…. Back in early 2000 the Governor was basking in the fact that there were large unrealized gains in the plan – so he had a bill passed that reduced the School Districts contributions – while keeping the higher levels on the teachers. This then reduced the expense to the local districts for some number of years — so we can not have it both ways.. The obligations must be kept – and if that means larger contributions by the district – so be it and take comfort in the savings over the past many years.
    I also support changing the plan for new hires to a defined contribution plan.

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  5. Not sure what the purpose of this “revelation” was at this point in time — as it’s been more than clear for a long time that this was coming . Good for Kevin if sounding the alarm is a tactical move, because just talking about it hasn’t gotten much action. I was turned into a “request for information” pariah who wanted too much information 2 1/2 years ago when I started to question what they planned to do going forward. (in the year of a below the cap increase) I stopped asking when it was clear that the dance was taking place behind closed doors if at all.

    Kudos to the idea of looking for solutions. A student activity fee — if if was $100 a student, would result in half a million dollars….if it was $1,000, it would result in $5M….neither number will fix the problem. And this is a public school. What number is fair?

    It is my opinion that if TE believed that the state was not going to address it, they had a duty to BUDGET for this problem….not proudly staying below the cap. However, the thought always has been to allow taxpayers to keep their own money until it was needed. I was okay with that at one time, but the cap changed that — you cannot go after a major increase in the year you need it (absent referendum)….so letting you keep your money until it is needed may well obviate the ability to pay the piper.

    The pension change was that retirees used to accrue 2% a year for each year worked toward a pension. The legislature proudly upped that to 2.5% a year….for every year, not just going forward. So people still working who had worked 30 years went from a 60% pension to a 75% pension in the stroke of a pen. 40 year employees that were entitled to an 80% pension (percentage of the final 3 years of work) now can get a 100% of their final average salary for the rest of their lives without PA tax obligations. (And yes — you can go over 100% from my understanding of the legislation) And it cannot be rolled back for anyone working under these rules — the PA constitution (pardon me that I don’t recall the details) doesn’t allow any reduction in compensation. The pension for new hires only can be changed going forward…or they could change the formula in other ways– but this is a problem where the only fix is going to be money. So it can come from the state (Ha!) or it can come from local taxes. The presumption that most boards are making (even ones like TE who do have the resources to pay it) is that there are too many smaller districts and poorer districts that simply don’t have the resources (read: income or property value) to tax (read: confiscate). We are talking about some incredible rates (the state pays about half). In 1986, the employer rate was 20.04% of payroll into the PSERS fund — the employee rate was 5.27%. From this chart, you will see that in the early 2000s, the rate was WAY down for the employer….because about 65% of the pension was funded by earnings on the PSERS fund. Now that earnings have declined (and in fact some years the fund has lost value) the rates have climbed.

    School year – employer contribution – employee contribution
    1986 20.040% 5.27%
    1987 19.900% 5.29%
    1988 19.540% 5.34%
    1989 19.270% 5.37%
    1990 19.680% 5.53%
    1991 19.180% 5.69%
    1992 14.900% 5.46%
    1993 14.240% 5.48%
    1994 13.170% 5.51%
    1995 11.060% 5.55%
    1996 11.720% 5.59%
    1997 10.600% 5.62%
    1998 8.760% 5.65%
    1999 6.040% 5.69%
    2000 4.610% 5.72%
    2001 1.940% 5.77%
    2002 1.090% 6.43%
    2003 1.150% 7.10%
    2004 3.770% 7.08%
    2005 4.230% 7.12%
    2006 4.690% 7.16%
    2007 6.460% 7.21%
    2008 7.130% 7.25%
    2009 4.760% 7.29%
    2010 4.780% 7.32%
    2011 8.22% 7.34%

    For 2012, the rate is projected as 8.22%. For 2013, the rate is 10.59%, and in 2014, the rate is 29.22% (and continues to rise to 30+ percent through 2020). It starts to decline VERY SLOWLY and will reach 14% in 2039. Now — this is PERCENT of payroll….(note that the employee contribution tops out a about 7 1/2% during this time period.) All of this is IN ADDITION to social security and medicare for both the employer and the employee.

    So this is a staring contest — and the TE effort to keep tax increases low is philosophical — you can keep your money until they truly need it. They could have taken a little at a time — something they did not choose to do — but if the state sends the bill, there will be little choice but to pay up. The issue becomes — if districts cannot raise enough revenue, JUST HOW WILL THE BILL BE PAID? Answer: I really have no idea — but I’d like to think the taxing authorities do. Ignoring it isn’t going to fix anything. The system can bankrupt? Or can it?

    This is boring stuff indeed….but it’s one of the reasons that the budget talks have been serious — but not always to the point. We are all in this together (all 500+ PA districts), but being on the Titanic together is small comfort. As taxpayers, both locally and state-wide, we are in for a rough trip.

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    flyersfan Reply:

    Andrea, thanks for great information and perspective. It seems frustrating, and another example of how government seems to work counter to the good of the greater electorate.

    My granddaddy told me to be a lawyer or doctor, but maybe better advice would to suggested teaching.

    At least we can’t blame Warren Kampf for this, or can we?
    I shudder to think of the tax increase that will come to fund these pensions. Creates some resentment. Unless the legislature can change things. Do you think that is possible? Or will they set us up for a huge tax increase and/or serious reduction in instruction? Thanks

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  6. We all seem to agree that new hires should be on a defined contribution plan. Furthermore, in order to deal with the funding issue in a meaningful way, younger (under 45 years old?) teachers should be transitioned to the DC plan. If we don’t consider a transition for some current teachers, we will have little impact on this funding issue in the short/intermediate term.

    My personal experience in business is similar to many – I had a defined benefit plan, which was frozen about 10 years ago – when I reach retirement age, I will collect a very modest pension. Starting in about 2000, the company, and I, made contributions to a 401(k), which I subsequently rolled over when I left the company. Fair enough.

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  7. Here’s the teachers’ perspective, I believe. They had nothing to do with Governor Ridge’s decision to lower the state’s and school districts’ contribution rates in a healthy economy. It was assumed PSERS would earn its way out of any funding hole. The state legislature fiddled with pension formulas with Acts 9, 38 and 40, re-amortizing “unamortized accrued liability” over a longer time period.

    Plus when the recession hit, PSERS lost almost 30% of its investment value.

    Over the last 10 years PA’s teachers have contributed almost $7.5 billion into PSERS while the state and school districts combined paid in only $3.8 billion. Employer underfunding has helped create this looming crisis.

    As others have suggested, offering less generous pension commitments to new hires seems inevitable, but it will have its own costs in terms of teacher morale and T/E’s competitiveness for the best new teachers.

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  8. By law, existing teachers cannot be “transitioned” to a new plan so that solution is off the table.

    Revenue to cover increased pension contributions can be raised through RE tax rate increases above the Act 1 cap. Retirement contributions are an exception to the Act 1 cap.

    There are only four solutions –

    1. Convene a constitutional convention to lower the retirement benefits promised to the teachers.

    2. Pray that the stock market soars so pension fund earnings cover the shortfall.

    3. Lower teacher salaries to compensate for the large pension contributions.

    4. Raise taxes to cover the shortfall.

    Solution 1 is very unlikely.

    Politicians will talk about solution 2, but the probability of it happening is small.

    Solution 3 won’t happen. There is no way for a school board to lower teacher salaries. Absent a contract agreement teacher will opt for the “status quo” which means they continue to get the same salary – and this lasts until a new contract is reached.

    Solution 4 will happen. The legislature will slowly phase in the increases similar to the provisions of House Bill 2497 (which the teachers union supports). The bill counts on the “frog in a cooking pot with the heat slowly applied” effect to escape public ire.

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    Kevin Grewell Reply:

    True enough, except that even #4 will not work in the long run. We are soon approaching a time when the public’s tolerance for tax increases is at an end, while costs continue to escalate.

    I propose a #5 which I think is more likely: A combination of “politically feasible” tax increases (which won’t completely fill the gap) and deep cuts to the educational program (increases in class size, less variety of course offerings, fewer counselors and support staff, deferred maintenance, elimination of most discretionary services, etc.)

    Eventually, when both “taxpayers” and “parents” get mad enough (and remember that “parents” are also “taxpayers”) maybe H-Burg will really look at the problem. This will mean very hard, politically difficult work:

    1) Increase state funding to supplement local real estate tax revenue (state funding of course will have to be paid for by some other kind of tax)

    2) Really look at eliminating unfunded mandates – help districts control their costs. (this was supposed to be done after Act 1 – there was to be a panel or commission, but you never hear anything about it. Why?)

    It should be noted that PA ranks very low among states in terms of funding its public schools. State money used to (late 1970’s I think) fund 50%. Now it is about 35% (T/E as an “affluent” district only gets about 12 or 13% from the state and about 1/2of 1% from the federal govt.)

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  9. Aren’t our school taxes much lower than many other townships and municipalities? When I (informally) compare our taxes to others from Radnor, Bucks county, Delaware county and Philadelphia, it appears so.

    Don’t most taxpayers here want to maintain the high quality education students receive in the T/E school district – and offer the students the many extras they receive, like small classrooms, a wide variety of courses, etc?

    I think that if our school taxes need to be raised to sustain the excellent and well-earned reputation we have, then so be it.

    BTW – my husband and I have no children, so we don’t directly benefit from the T/E school system. We do benefit indirectly, of course – and also are happy to pay our taxes to benefit the education of all of our township’s students.

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    Andrea Reply:

    The short answer to your question is YES. The problem is that the people feeling the tightest squeeze financially are often those who do not directly see benefits from our school system — and hence the request/demand for affordable taxes.

    You can watch the news over the next few weeks (months) to see where Radnor and Lower Merion contracts go — the PSEA works across districts to improve a variety of working conditions and wages by comparing one district to another, creating a competitive feel between districts, but the local school negotiators rarely (not aware of any in many, many years) get together and work out a program. If you read the LM blogs, you will see that they are worried about losing teachers to other districts — now WHERE does that idea come from? Their salaries drive up salaries elsewhere (no dearth of applicants, but that recruiting edge seems SO IMPORTANT at the table).

    Anyway — Kevin offers us some cuts that would make a difference….I believe that Class sizes and reducing the number of periods a student can schedule (while increasing the periods a teacher must teach) are the only true variables that can be used to offset costs. Fewer course offerings sounds cheaper, but ultimately, you fill a certain number of seats for a period of time every day. What the person standing in the front of the room is teaching is not relevant once you have eliminated courses that did not have adequate enrollment to offer the course. This area of budgetting was on the table this year, but removed once they reached their goal (and after launching another significant bond…which barely made the news).
    School board members work hard — but please remember that most board members have a vested interest in the program for their own kids….so you don’t need to worry that they will decimate the schools. They will work hard to figure out a way to make it affordable — and with voter scrutiny they will find creative ways to keep it affordable. Our schools are very much a community asset.

    Statewide, Kevin is absolutely on the money (is that a pun?) The governor had a plan to deal with PSERS issues (google it) but all they did was adjust the actuarial assumptions to stretch out the problem. PSERS is no different than social security — except the PA constitution does not allow impairment of a contract so you cannot rollback the increase….(then again, constitutions are amendable?)

    As a “wealthier” district, TE will pay — whether through an increase in state tax rates or local real estate taxes, or income taxes applied here. We will never get back from the state what we pay in — so the fixes we look for should be about mitigating the pain statewide, not just in our own backyard.

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    Kevin Grewell Reply:

    I think the record shows that many (perhaps most) of our taxpayers have been willing to pay higher taxes to keep the quality of our schools high. But with taxing authority capped at the “inflation index” under Act 1, that will simply not be possible in the future, even if a majority of local citizens continue to support the tax increases necessary to support the schools.

    Exceptions and rferendums under Act 1 are not that practical – for one thing, enough people oppose any tax increases to make use of exceptions politically dangerous. What good is taking a lot of excptions one year if that would mean to board turned over in the next election to a group of anti-tax school board candidates?

    And a referendum is unlikly to pass.

    Andrea is right, of course, that T/E will pay one way or the other – taxes will go up – but there will still be budget shortfalls and cuts, because “business as ususal” (full local taxing power) is over.

    One caveat to the prior comment – how much can be made up by state level taxation (state income tax and increased state contributions to our district) and/or a locally imposed EIT is an open question.

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    Kevin Grewell Reply:

    To be clear, I was on the School Board, not the TSC (I know you know that, but it might not be clear to others in the context of your remarks).

    We do disagree about the validity of the TSC report and the vote to place a PIT referendum on the ballot under Act 1. It is way too much to repeat again here – we have debated this at length elsewhere on this blog.

    I have said elsewhere that I think an EIT is something that will be seriously looked at in the future – but that there is much local opposition to it, so it will take a lot of doing to get it passed and it may be quite some time before the publis changes its mind on the subject.

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  10. Kevin,

    I think your #5 will be the solution.

    I smile when I hear of shifting the tax burden away from the local RE base to the state. Since TE is a wealthy district it will mean a disproportionately higher tax burden for TE residents albeit those with taxable income like working adults. (not retirees)

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  11. Lots of good feedback. Thanks Kevin — I always know you are up to speed on Act 1….which mercifully occurred after my departure. (Though I might note that boards in the 80s proudly proclaimed “ZERO” tax increases while incurring double digit expenditure increases….but no one complained!)
    Thanks also to Kate who rightly reminds us that this is NOT of the teacher’s making. This is purely political (though let’s not be naive about the role PSEA lobbyists played in crafting the legislation — everyone was enjoying the bounty from investment returns that exceeded the actuarial requirements of the plan at the time).

    PSERS has a board that put together a good powerpoint presentation in December 2009 contemplating all this and more. After all — that board is simply doing the math. To borrow again from it with information (that’s where most of my previous info came from):

    In referring to the myriad of options to attempt to come to terms with some of these funding issues:

    “Each of these would have limited impact on current funding issues because it could only be done prospectively for new employees Any such changes would have to be prospective only, (meaning impacting new hires after the effective date of the change), to avoid the PA Constitution’s prohibition against the impairmentof a contract (Article I, Section 17)

    The courts have ruled that PSERS’ pension benefits are contracts with the existing members of the System, regardless of vesting, and thus subject to the constitutional impairment of contract prohibition.”

    PSERS offers this commentary:

    Converting the System to a DC or Hybrid plan will not affect the current liabilities or resolve the immediate funding concerns. In fact it may aggravate the Commonwealth’s and School Employer’s cash flow problems as they will be supporting two pension plans.

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    Kevin Grewell Reply:

    Your detailed factual analysis adds quite a lot to this discussion – most importantly, it makes people realize that there are no quick and easy solutions to this problem.

    Act 1 has made service on the school board go from difficult to impossible. It used to be you put up with a lot of abuse but you could still get things done for the kids. Now, I wonder whether it is just going to be all abuse going forward.

    It may be hard in the future to get people willing to serve on the board. If I was thinking of getting on the board for the first time today, I don’t think I would go for it.

    One unintended side effect of Act 1 is to discourage good people from serving in local governement.

    Of course I would like to see it repealed, but I don’t see any realistic possibility of that right now, or at any time in the forseeable future.

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    flyersfan Reply:

    kevin, so with the board’s taxing ability essentially capped off, and w/o exemptions nor referendums, what taxes will go up to help the school and board? State taxes? Sorry if I am slow on the uptake… And if state taxes go up, will those taxes find their way back to us??

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    Kevin Grewell Reply:

    Well, a combination – real estate taxes will go up by the cap, every year. That’s a given under Act 1. I think the legislature will eventually have to confront the funding problem, and I think state taxes will go up to cover it. We will of course, pay both.

    I’m not sure the legislature will solve the shortfall completely – in fact I doubt it. So despite higher taxes, we will still very likely have to have program cuts too.

    One reason is that whatever increases in state funding are enacted, T/E as an “affluent” district will only get a token fraction of the increase. Poorer districts will get most of it. I think the thinking is that we have a lot more already than the poor districts, so if we have to make cuts, so what? A level playing field, but “level” at a lower level, if you know what I mean.

    I guess my point was that the old reality was that a local district could have the program it wanted and could afford and was willing to support with local taxes. Now T/E may be a district where the local taxpayers are more than willing and able, but will be prevented from maintaining the program they want, because so little local control remains.

    One local power is the EIT – again, not sure it would entirely fill the gap either, but we may end up paying that too.

    Sorry to sound so negative – that’s the “worst of both worlds” – higher taxes and cuts too.

    But the legislature has demonstrated its inability to pass thoughtful, well-crafted legislation with an eye to the long term as opposed to the short term (political) considerations. Act 1 is an example, a law that only makes things worse. A frankenstien stitched from the corpses of failed Act 50 and Act 72. Yeech!

  12. Accidentally left this off the quote from the PSERS board: :

    Politically, some prospective benefit cuts are probably inevitable, even if only symbolic in nature with respect to resolving the rate spike. Similarly, politically, benefit enhancements are not likely now or in the near future.

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  13. So, I guess it’s back to school time, and so time to revisit PSERS, too.

    I do agree that Harrisburg is the prime contributor to the problem with the 25% increase in the multiplier and the reduction in employer contribution rates (thanks, Andrea for the data).

    But let’s not forget the contributions of other players: the PSEA with its hold over the legislators, and the School Boards that have succumbed to the leveraging of districts against each other and enabled the recent munificent contracts.

    Just take a teacher with a Masters and 30 credits and 6 years of experience in 2008/9. Salary $58,930. By 2011/12 that teacher has moved down the matrix to 9 years of experience and the matrix has ratcheted up, salary is $82,480 – a 40% increase over 3 years!! The higher the final salary, the higher the pension.

    And there’s not much sign that the union is backing down. From what I read of the Radnor negotiations, a mere a one year freeze on the salary matrix and movement down it has been rejected.

    I’m really worried that the proposed fixes come at the expense of the next generation while those increases of 25% in the pension and 40% in 3 year salaries of current union members are sacrosanct, constitutionally protected, etc. Surely there must be some smart lawyers that can attack the constitutional disconnect that allows increases but not decreases? And when can we expect Kampf and Drucker to come out with their own fair and practical long term solutions?

    In the meantime, we’ll see where TESD takes the good array of cost saving and revenue programs teed up for this year. Will there be serious discussion of the EIT to reclaim the $ millions leaving the townships?

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    Pattye Benson Reply:

    Ray – I too would like specific comments (solutions?) re the pension situation offered by our 2 State House Rep candidates.

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    Andrea Reply:

    I know this is a focal point of your analysis — but I might suggest that you write local editors in support of keeping the salaries reasonable for both Radnor and LMSD, because those are the tails that wag the local dog….and since districts seem opposed to working together, whatever they fail to accomplish will end up on the bargaining table in TESD…they all use the same reps from PSERS. (Note — the locals do not have to take marching orders. When Carole Aichele and I did our last contract, the union dismissed the uniserve rep in favor of working for things that worked for TE – not for PSEA)

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  14. Again — don’t we need to see what we have to spend in income tax to get that back? What is the EIT proposed to generate for the townships / district? The schools are in two townships? Doesn’t that complicate things? Our taxes are going to go up — it’s how we decide to collect it that remains to be identified, right?

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  15. Regarding John’s comment (above) in relation to state funding for public education. I do not agree that this is entirely a matter of local taxation. State funding has to play a role in the solution (along with local effort).

    PA ranks very low among states in its funding for public schools. I have said this elsewhere, but PA support used to be 50% of the cost, but today is about 35% (with T/E getting about 12 or 13% from the state and less than 1% from the federal government).

    A seriousl look at this at the state level is also warranted. Will we get that? Probably not. But it’s the truth. PA has failed to keep up its historic partnership with the local school districts.

    [Reply]

  16. THanks again Kevin. As usual, you bring candor and information to the table. John — I know your heart is in local politics, but your continued reference to a decaying TESD is a bit misplaced. As we have shared countless times, TESD’s finances are far more reasonable than most area districts. Right now Radnor and LMSD are in negotiation on contracts, and we know the story of the LMSD litigation costs. They are spending millions to avoid spending more millions. Kevin’s assessment as to the state’s culpability in this is spot on in my opinion — the local tax enabling acts are simply ways to push off the responsibility for “taking the bullet” when they continue to empower unions and do things like increase pensions by 25% with the stroke of a pen. The condemnation of the TSC is another effort to tilt at a fallen windmill — it’s moot what you think that effort was, because it was rather strong in its failure to generate a new source of income. TESD can enact the tax and then T and E will both jump in. T already gets 1% of transfer taxes, while E only gets 1/2%….and both dump costs on the TESD whenever possible. In fact, TESD paid roughly $450K plus in fees to Tredyffrin when the high school was remodelled… for “their architects and engineers to review our architect and engineering drawings.”
    But clearly off track here — do let us all know what school district you believe you will favor with your youngest’s attendance….because as we have pointed out factually, the taxes on a house that cost $500,000 is cheaper in TESD than anywhere else…..and despite the woe is me feel to budgets nowadays, TESD is still ranked above our neighboring districts in most PA rankings.
    I look to Ray for his continuing constructive analysis of the contracts and PSERS issues. Kevin, don’t be a stranger :)

    [Reply]

    Kevin Grewell Reply:

    Thanks again, Andrea! I hate to perpetuate this, but I have to address some of John P’s comments above (his “answer”): (this is directed at JP)

    Eliminate the school board because it brings nothing of value to the community? WHAT? So, you favor NO LOCAL CONTROL at all? You think H-Burg and administrators with no local checks and balances from locally elected board members (who are accountable on election day to the local people) will do a better job?

    I think most people in this community would disagree with your assessment of the job the board has done over the years. Again, BEST SCHOOLS, and AMONG THE LOWEST SCHOOL PROPERTY TAXES IN THE STATE. Excuse me, the record does not justify your negative comments at all. Period!

    As for Act 1 and the EIT – had we all favored enactment of the Act 1 EIT and had the voters approved the referendum, that would still NOT ADD ONE THIN DIME TO THE SCHOOL BUDGET – IT WAS REVENUE NEUTRAL AND ONLY WOULD HAVE SERVED TO OFFSET AN EQUAL AMOUNT OF PROPERTY TAX.

    The EIT you (John) are talking about was not on the table. Act 1 strictly limited what could be considered, what could be done, how it was to be done, etc. The mandate was limited, and the TSC and board fulfilled that mandate.

    As for just enacting an EIT under the local tax enabling act, as we have discussed many times, there are issues with that as well – for example the Philadelphia Sterling Act exemptions. As the TSC study pointed out, it is not at all clear that we could identify and collect the huge amount of Steling money which is paid by T/E residents who work in Philadlephia.

    That aside, the opposition of the community to ANY additional tax, such as an income tax, was, and is, HUGE. People do not trust any government entity with another way to tax them.

    What’s more, the conditions that prevailed at the time of Act 1 (2006-7) were not the same as today. AND NO, WE DID NOT SEE THE ECONOMIC CRASH COMING – but then, neither did you, or anyone else for that matter. When we did the last teachers’ contract, we had the projected revenue to cover the entire contract.

    You (John) say the PSERS crisis was forseeable. Yes, it was. That’s why I have been speaking out about it since I was elected in 1999 and have written numerous letters and e-mails to our legislators, spoken up at legislative forums and town meetings, etc. What have you done on your (recently discovered) issue?

    The problem is so big that it has to be fixed by H-Burg. I frankly don’t think a local EIT will do it. It’s like trying to put out the Chicago fire with a water pistol.

    You, and others concerned about this issue should take the fight to the place it belongs, where something can be done about it – i.e. HARRISBURG.

    [Reply]

    Mike in Berwyn Reply:

    Thank you, Kevin.

    [Reply]

    Kevin Grewell Reply:

    You are most welcome. Thanks again for the support.

    Kevin Grewell Reply:

    John,

    We have been over this topic in great detail in two or three other threads on this blog, and while I know YOU don’t want to get it, I will reply one more time for the benefit of others who may be reading this.

    You confuse the Act 511 Local Tax Enabling Act (which authorizes a local gov’t. entity to enact an EIT) with Act 1 of 2006.

    Act 1 REQUIRED the school board to appoint a Tax Study Commission (TSC). The TSC’s mandate was strictly limited and defined by Act 1. It’s task was to recomend to the board whether to put an EIT or a broader Personal income tax (PIT) on the ballot referendum for possible approval/enactment by the VOTERS.

    Now, the Act 1 EIT (actually a PIT was recommended) can ONLY be used to offset and reduce an equal amount of property tax. It is REVENUE NEUTRAL to the school district. It would not solve the budget shorfall. Act 1 was a tax shifting scheme, nothing more.

    Act 1 REQUIRED this referendum. So, what was the board supposed to do/ Enact an Act 511 EIT at the same time the Act 1 EIT (or PIT) was on the ballot?

    John – here it comes again – YOU CAN’T DO THAT. It is not legal – the TSC had a LIMITED mandate and it fulfilled it. It was to study the effects of an ACT 1 income tax, nothing more. It was not legal for the TSC to study a general Act 511 EIT. Also, I believe neither Act 1 nor Act 511 allows more than one income tax. Study the bills. You could not have two income taxes. What you say the TSC should have done is not possible or legal.

    Now, I suppose you can argue that the school board should have enacted an Act 511 EIT either before or after the Act 1 time frame (before or after 2006-7) but – stay with me now –

    THIS HAS NOTHING TO DO WITH THE TSC.

    With respect to the PSERS problem, it was created by the state legislature and can ONLY be solved by them. Act 511 is not a sufficient tool for the local board to use to solve the PSERS problem. Since the township will grab 1/2 of the Act 511 EIT and since we probably cannot recover taxes paid by T/E residents who work in Philidelphia (under the Sterling Act), the Act 511 EIT will in all likelihood never provide enough income to close the gap.

    How many letters and phone calls have you had with your state legislators about this?

    You are a dog with a bone, but you are chewing on the wrong bone.

    [Reply]

  17. John says, “Knowing that getting rid of the board is not feasible, my alternative wish would be that to serve – you have to have a kid in the system. At least then ,you have skin in the game. It means something to you.” Of all the things you’ve written here, that may be the most ridiculous. How about the residents of this community, the 75+% of taxpayers that don’t have a “kid in the system”? – the ones that PAY for the educational system. No “skin in the game”?

    As for your other “arguments”, Andrea and Kevin have straightened you out, to the extent that’s possible – There are none so blind as those that refuse to see. We can all hope that you deliver on your threat/promise to move out of the District when your youngest graduates.

    [Reply]

    flyersfan Reply:

    John,
    With respect to Mikes last post, he speaks for me!

    [Reply]

  18. John,

    I appreciate your positive comments about my efforts (above). That’s the first positive thing you have said about anybody in a long time. But it is sandwitched in among lots of negative comments about me and other board members. There are about 100 things I could say about all of that, but let’s just say (for the sake of brevity) that I disagree with your assessment of the board.

    As for the $3 million that would “come home” under an EIT, is that gross, or net of the 1/2 the township will take? Is that adjusted for loss of Sterling dollars? Are we really talking about $1.5 million (or less) to the school district?

    Lots of devils in the details, and it is clear that the EIT alon will not close the gap – even if the district netted the whole $3 million.

    As for my loss in the last election – as you well know it was a very tough year for incumbents who happen to be registered and endorsed Republican. You yourself know how little support you get from the party. If I had another $1000 bucks for another mailer I could have won that. I lost by 77 votes in a 3 way race for two seats. Big deal.

    Actually, I think Karen is OK and I don’t mind her edging me out. Best thing that ever happend to me – I got my life back.

    Oh, one more comment on PSERS – when we did the last teaher contract, we had the projected revenue out foru or five years, enough to cover the entire contract. We were doing fine until the housing bubble and loss of transfer taxes. Again, the real biggie that puts this over the top is a state mandated and state controled retirement system. Anything the board could do is a drop in the bucket.

    You want to bash the local board over that, but again, that’s chewing on the wrong bone.

    [Reply]

  19. Arrogance? Who’s the one that suggested that the taxpayers, that pay tens of millions of dollars to fund the TESD, have no “skin in the game”?

    Also, as Kevin points out, and you agree, “PSERs is a state issue”. Mr. Drucker is our representative in Harrisburg. Where is he on the PSERs issue?

    [Reply]

  20. John,
    I agree with your feelings about many on the School Board – but you better be careful when you criticize Motel when talking to his brother-in-law Kevin Grewell.
    I have had many exchanges with Kevin over his reply to my email to the Board over the decision to spend 7 million dollars to PURCHASE a facility to house the over paid admin staff on West Valley Road. Even today – I feel that the Board lied to residents over the reasons for this decision. One clear argument was that Board meetings would now be held on West Valley eliminating the need to use the high school and the associated costs.
    I am at a loss as to why the need to PURCHASE the bricks and mortar on West Valley Road — which can never have educational use other than for the admin staff. No new schools will housed there.
    But Kevin took any opposing comments as an affront to his brother-in-law (Facilities Chair). And then there is th fact that these folks had no plan for the old ESC building. It must be nice to be able to PURCHASE a new facility without having any plan for the old building or property. This would never happen in private business or in ones personal family. Not unlike the 4 house the Board bought nest to the middle school – WHY?? At first it was to provide tennis courts and then there was Motel’s bright idea to put down macadam for 75 additional parking spaces – duh?? Do middle schoolers drive to school??
    I am also happy to say that for the first time in my life I voted for the Democrat candidate and I am proud to be counted as one of the 77 that put Karen on the Board.

    [Reply]

    Kevin Grewell Reply:

    Well, I’ll go once more – look, Papadick (I at least have the guts to use my own name and disclose all of my connections, personal or otherwise – you KNOW what I’m talking about) – (AND BY THE WAY, WHY DON’T YOU COME CLEAN ON THAT? You have an undisclosed bias)

    You and I have discussed this in great detail elsewhere on this blog and the older blog. I won’t repeat all that stuff here. I just want to let people know there were lots of reasons why that purchase was made. You never liked it, so that’s your opinion. What I objected to is your repeated assertion that there were no valid reasons for the decision, when I articulated several to you. So you don’t accept them. Fine, you have a right to you opinion.

    Re your opinion of the board and John’s opinion. John asked what Pete Motel brought to the district.

    He Chaired Facilities after Andrea. Facilities is a tough committee and you take a lot of heat because that’s where some real money is spent. But Facilities over the years has made sure that our kids are set for the forseeable future with clean, modern facilities, atheltic fields, etc. Both Pete and Andrea before him did a lot of good work here, and our district would be falling apart right now had they not been willing to make tough decisions and take a lot of hits for the kids.

    Pete also is responsible for the creation of the Operations and Opportunities Committee – which resulted in well over $10,000,000 in cost savings which DO NOT IMPACT THE PROGRAM AT ALL.

    That’s just to name a couple of things.

    Really, you and John both should get together some time. You can reinforce each other’s unfounded negativity to your heart’s content. Just leave the rest of us out of it.

    [Reply]

  21. There are been 51 comments posted on this topic and I thank those of you who have provided thoughtful commentary. I think that that those who are interested in this post have now responded. Because some of the comments have turned more personal, I will now close this post to any further comments. If someone has something new or interesting on the subject, please send an email directly to tredyffrincommunitymatters@gmail.com

    I appreciate your understanding.

    [Reply]

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