Retirement contributions account for big increase in district
As officials of public school districts prepare budgets for the 2014-15 school year, one of the heftiest increases will be contributions for employee retirements.
Districts have had to pony up more money in recent years to help fund the Public School Employees' Retirement System, or PSERS, which pays for pensions and health insurance for school retirees. The system is underfunded by about $33 billion, according to PSERS.
Contributions have gone from 8.65 percent of a district's payroll for 2011-12 to the 21.4 percent recently set for the 2014-15 school year.
“The state should have been replacing the money with stimulus funds a few years back,” Plum School Board member Kevin Dowdell said. “(Former Gov. Ed) Rendell used it (stimulus funds) for operating expenses. It could have been used to shore up the pensions.”
Employees contribute to their retirements, and the state returns to districts about half the payments they make. but district leaders say the requirement to help shore up an underfunded system still is difficult.
A spokesman for the Pennsylvania State Education Association, or PSEA, the state affiliate of many local teachers unions, said a new tax could help matters.
Gov. Tom Corbett exacerbated the problem in recent years by cutting state funding to schools, said Wythe Keever, PSEA spokesman.
Corbett could both eliminate corporate tax breaks and impose an extraction tax on natural gas and use the proceeds to help reduce the impact of the increased pension costs, Keever said.
“The problem didn't happen overnight, and correcting it is not going to happen overnight,” he said.
District leaders, meanwhile, are looking at strategies to make the upcoming payments. Some have been planning for the retirement spikes by setting aside money.
Others are dipping into their districts' reserve funds. Some leaders also are thinking about asking the state Department of Education to approve exceptions to raise taxes above the Act 1 Index to bring in more money for the PSERS payments, as well as to cover other costs.
Officials of the Franklin Regional School District have planned for increased payments.
Since the 2008-09 school year, district officials have set aside money for this purpose, said John Perry, director of financial services.
About $3.8 million had been set aside, $270,000 of which is expected to be used to help offset the 2014-15 payment.
“The projected employer contribution rates continue to increase,” Perry said, “so it's prudent to set aside any surplus funds to mitigate the need for future tax increases.”
Leaders of the Shaler Area School District, with a $74 million annual budget, have set aside $675,000 from the reserve fund to help cover the anticipated $880,000 increase in the PSERS payment.
“If we use all that, we're still going to come up short, so it's a dilemma,” said Charles Bennett, director of business affairs. “We're really going to have to sit down and talk about the budget.”
The increase for PSERS is “drastic,” said Shauna D'Alessandro, vice president of the West Jefferson Hills School Board.
“It is killing school districts,” she said.
D'Alessandro said district officials have put aside money in anticipation of the increased costs of PSERS for the past few years. The district's 2013-14 budget is $40.3 million.
“We are looking at the long term,” D'Alessandro said.
D'Alessandro said districts also are suffering from a lack of reimbursements for building projects.
West Jefferson Hills officials are looking at building a new $70 million high school.
“It is a one-two punch from Harrisburg — the PSERS costs and taking away our (construction) reimbursement money,” D'Alessandro said. “It's a whole ball of wax, not just one issue.”
Plum School District officials predict about a $600,000 increase from last year in the PSERS payment for a total of about $5.5 million. The district's budget is about $56 million.
Dowdell anticipates the cost of health benefits for district employees will cost another $500,000.
The district's anticipated deficit is $1.5 million without taking into account any increases for contracts, including the teachers' pact, for which negotiations begin this month.
The Plum School Board is expected to consider a preliminary budget Jan. 28.
Members are considering applying to the state Department of Education for exceptions to get some relief from the PSERS payments, as well as increasing special education costs.
The Brentwood School District hasn't ruled out asking for exceptions, which would give the district permission to raise property taxes above a predetermined index.
Business Manager Jennifer Pesanka anticipates Brentwood's PSERS payment for the upcoming school year will be about $2.1 million, up from $1.6 million.
The annual budget is about $20.8 million.
District officials are looking to the reserve fund as a potential for making the payment. Pesanka estimates the reserve fund will contain about $4 million as of June 30.
Board members also might file with the state Department of Education for exceptions in the areas of PSERS and special education costs.
The district last year successfully was approved for both exceptions, which resulted in $138,704, Pesanka said.
“We aren't panicking yet,” Pesanka said.
Karen Zapf is a staff writer for Trib Total Media. She can be reached at 412-856-7400 ext. 8753 or email@example.com.