LEHIGH VALLEY LIVE.COM Editorial: School districts in Pennsylvania are now sharing their preliminary budgets for the coming school year, and — no surprise — pension costs are the biggest source of distortion and tax pressure. That’s not going to change anytime soon; annual local contributions to state-regulated pension funds are on the increase…
On the state level, the Legislature continues to foist a pension debt crisis onto future generations, even as it gouges current taxpayers. Property tax reform remains on the shelf as well; Gov. Tom Corbett and legislators can’t agree on a redistribution of the tax burden…
Yet still on the “sustainable” block are pensions that can give teachers, administrators and other public employees more in total pension payments than they received in salary in their their working days. In Pennsylvania, a teacher who retires with a $90,000 salary after 35 years gets a $78,750 pension; the actuarial demand of such transfers of wealth is a huge part of what is driving annual budget deficits to school districts. It’s an existential threat to the affordability and quality of public education — not to mention those who are scraping to pay tax bills or losing homes… (more)
For some reason this reminds me of a circular argument. School districts want help to pay for the benefits they negotiated with public employees presumably because they dread raising taxes and thus the ire of local citizens. So, they want help from the state who will extract the money from those same citizens. It’s unfortunate but until we pay attention to that which governs us we will have to pay for our ignorance. Letting property taxes increase is an alternative. Allowing the pension funds to go dry is another.
School districts in Pennsylvania do not negotiate pension benefits with public employees; Pennsylvania has controlled all public school pensions since 1919. The amount of money deposited into PSERS is dictated to school districts by the state.
The current crisis was created in early 2001 when the state legislature granted itself and many other state officials a 50% increase in its pension; to divert attention, 25% pension increases were given to all state and public school employees. Then Pennsylvania, assuming a double-digit return on investments, failed to charge school districts enough to adequately fund the retirement programs. Double digit investment losses during the 2008 financial crisis made the pension funding shortfall much worse.
Perhaps another thing must be recognized. While the state sets the terms and contributions, all stake holders have a responsibility to actively participate. Somehow none of the stakeholders dunned the state for the fiscally irresponsible management of PSERS and unlike private (corporate) pension funds, the law conveniently allows the state to underfund it’s responsibilities, assume unreasonable investment growth, and waiver contributions from school districts.
I assume all of this was done to avoid the political fallout which will soon be upon the state.
The crisis exists despite the fact that investments have recover well beyond the 2008 losses. But don’t be fooled. When someone says the state, they mean the taxpayers. Rolling pension benefits back to 2001 levels seems reasonable. It will be painful but political mismanagement should not be rewarded.