Overhaul of Pennsylvania teachers' pensions critical, officials say
Public school teachers are calling an effort by Gov. Tom Corbett to cut their pension benefits disrespectful and say it breaks a promise made to them when they were hired.
But state officials and local school board members said this week that overhauling state employees' and public teachers' pensions is crucial to stem a $41 billion pension funding shortfall and ease sharp increases in state and school district contributions to the retirement plans.
More than half of the shortfall — about $26.5 billion — is owed to the Pennsylvania School Employees Retirement System, with pension contributions set to increase to 16.75 percent of school districts' total payroll this year.
Most school employees contribute 7.5 percent of their salary to the plan, but some contribute more than 10 percent to boost their retirement earnings.
The average annual annuity payment for retirees age 60 to 64 is slightly less than $38,000, according to a June PSERS report. In order to retire with 100 percent of their salary, teachers would have to work anywhere from 40 to 50 years, depending on when they were hired, officials said.
Corbett's proposal would move new employees into a 401(k)-style plan instead of the current guaranteed-benefits plan and would reduce future pension benefits for current employees by altering the formula used to calculate retirement payments. It would also temporarily decrease the state's and school districts' contribution rate, saving districts statewide as much as $1 billion over five years.
“Pensions are a promise to public employees who teach our children, keep our streets safe and care for the sick, elderly, and disabled,” said Mike Crossey, president of the Pennsylvania State Education Association and a special-education teacher in the Keystone Oaks School District. “Just because the state and school districts chose to reduce their payments and underfund the system for a decade doesn't mean public employees' hard-earned retirement savings should be reduced.”
But without a tax increase or significant surge in state revenues, officials would have to make cuts as rising pension obligations crowd out other state programs, said Budget Secretary Charles Zogby.
“We're going to put taxpayers first. They didn't cause this problem,” Zogby said. “They made their payments to the state government ... We're not going to go back to them and ask for a tax increase to bail out the pension fund.”
Steve Robinson, spokesman for the Pennsylvania School Boards Association, said the group is still reviewing Corbett's proposal, but that it generally supports pension reforms that make the system more stable.
“From our members' perspective, they're looking at very large percentage increases over the next several years that's going to be at unsustainable levels,” Robinson said. “It's hard to pick up those costs without cutting programs or raising taxes.”
Norwin School Board President Bob Perkins said the district expects it will have to raise taxes next year to cover pension costs. The district's projected savings next year from pension reforms — about $329,800 — could save about one mill in taxes, Perkins said.
“Anything they can do to lower the contribution rate would greatly help our school and I'm sure many others,” Perkins said.
South Fayette Middle School math teacher David Taylor, 43, of Bellevue, said teachers have faithfully contributed to their retirement every month without any of the “payment holidays” the state or school districts took.
“None of us feel really respected and I think we can live with that, but now (Corbett's) attacking us,” Taylor said. “We've lived up to our promises and the state hasn't and he's whopping it on our back. Everything can't be the fault of teachers.”
Jeremiah Dugan, 37, of Pittsburgh, said he's exhausted at the end of a week teaching rambunctious eighth-graders American history at South Brook Middle School. He worries that reducing pension benefits will mean he and other teachers may have to work beyond their best years.
“You don't want people to stay because they have to stay and I think we've all seen that in every profession,” said Dugan. “They work a couple years too long because they ... have a kid in college or they have a spouse who needs insurance. They at some point were probably outstanding educators, but you want people to be able to leave and not hang on the last few years.”
Staff writer Rossilynne Skena contributed to this report. Kari Andren is a staff writer for Trib Total Media. She can be reached at 724-850-2856 or email@example.com.
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