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 officials.
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.
“It's not just a Quaker Valley problem. It's a statewide problem. It's not just a PSERS problem, it's a SERS problem, too,” said Joseph Clapper, superintendent of Quaker Valley School District.
It was unfunded for awhile in good economic times, he said, “Then 2008 came along, and we all know what happened in 2008 — tremendous economic upheaval. Markets crashed, the economy tanked, and guess what happened to the PSERS fund? It lost hundreds and hundreds of millions of dollars.”
“Let's be clear, PSERS is mandated. At the local level, we don't make a determination of how much we're going to contribute, when we're going to contribute and in what form or fashion we're going to contribute. We are mandated.”
Clapper said the district is facing a 21.4 percent school contribution, about a 4.5 percent increase. “Four-and-a-half-percent of a big number is a big number. That increase to us is over $1 million.
“When we start off the 2014-15 budget, we're already over $1 million in the hole just because of the mandate of the pension system.”
Half of the $1 million is the responsibility of Quaker Valley. The state pays the other half.
“It really is imperative for the legislators to come up with a solution. They have vested interest in this because they're paying half of it.”
Clapper was in Harrisburg in the fall lobbying with an organization in the fall to make changes to PSERS.
“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.
Some districts have been planning for the retirement spikes by setting aside money.
Others are dipping into their districts' reserve funds. Some leaders 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 Hampton Township School District, with an annual budget of $43.9 million, prepared for the higher payments by establishing a PSERS Rate Stabilization Fund a few years ago. As of June 30, the fund contained $6.181 million, said Jeff Kline, director of administrative services.
Kline said he anticipates the district's PSERS net payment in 2014-15 will be $2.4 million, which would be a $580,000 increase over the current year. Districts initially send a full payment and are reimbursed about half, which means Hampton's initial payment is estimated at $4.8 million.
The district plans to use about $573,000 from the stabilization fund, as well as $7,000 from the general fund budget to cover the increased payment, Kline said.
The stabilization fund is expected to cover 14 percent of the 15-year increase in PSERS costs.
“The budget and tax rates will still need to be increased to maintain these costs in the future,” Kline said.
Karen Zapf is a staff writer forTrib Total Media. She can be reached at 412-856-7400 ext. 8753 or firstname.lastname@example.org. Staff writer Bobby Cherry contributedto this report.