Many of the comments lately on Community Matters have centered around the upcoming teacher contract negotiations and a forecasted school district deficit of $3.25 million. The PSERS crisis has reached epic proportions and many are suggesting that the problem needs to get ‘fixed’ in Harrisburg. During the last election, several school board candidates pointed their fingers at the state for help in school district bailout.
A variety of factors, including stock market volatility and a poor economy led to the system breakdown. This should not be a teachers’ union versus taxpayers or school board issue. PSERS is not broken because school districts did not make their fair share of payments to the system. School districts did pay what they were required to pay. It’s the ‘fix’ of the broken system that is difficult.
Over half of the PSERS system is funded by investment returns; the stock market crash in 2003 and the down economy these past two years have been in the primary factors in the PSERS problems. Investment earnings are the primary source of funding the PSERS benefits – not the contributions from school employees and taxpayers.
Again, what is the solution to fix the system? Proposed plans can only impact new school employees, it cannot affect existing employees already in the system.
PSEA teacher union president Jim Testerman, supports the current pension plan, “There are no easy solutions, but one thing is clear: the state and school districts must keep their promise to fully fund school employees’ pensions. The current PSERS benefit plan encourages individuals to become and remain educators, and ensures a stable and highly qualified workforce in our public schools.
There is a naivety to Testerman’s stance – what we want and what we can afford may not line up economically. In a perfect world, we would not be facing this economic crisis, and a funding change would not be necessary.
PSERS Board of Trustees released a press release on Friday which certified the employer contribution rate of 12.36% for FY 2012-13. Of the 12.36% employer contribution, 0.86% is for health insurance premium assistance and a pension rate of 11.50%.
According to the press release, were it not for the rate caps set in the 2010 Act 120 legislation, the employer rate would have jumped to 29.65% rather than the 12.36%. Beginning with the next fiscal year, members of the pension fund will contribute an average of 7.40% of their salary to help fund the retirement benefits.
Investment performance for PSERS for quarter ending Sept. 30, 2011 was posted at (-3.62%); 8.45% for the one year period and 6.95% for the 10 year period ending Sept. 30, 2011. Obviously, the extreme volatility in the markets is cited as the downward trending of performance.
According to the press release, “As of September 30, 2011, PSERS had 12.7% of its assets in non-U.S. equities; 10.8% in U.S. equities; 20.5% in U.S. and global fixed income investments; 21.5% in private markets; 12.0% in real estate; 4.1% in commodities, 11.7% in absolute return strategies, and 6.7% in cash and cash equivalents.”
Monday night is the Finance Committee meeting of the TESD – click here for the agenda. Under budget strategies for 2012-13, there are only two significant cost-savings that remain (other than educational program cuts). The outsourcing of custodial services ($950K) heads the list with a potential savings of $300K in equipment budgets. It is not clear what the equipment budget entails.
Without a T/E School District Public Information Committee any longer, I am anxious to hear the details of the ‘Communication Plan’ listed on the agenda for the Finance Committee. Betsy Fadem has been appointed chair of the Finance Committee; I am hopeful that she continues the district’s recent transparent and open public policy on school board matters.