Pa. pension costs pull from school districts, college students, turnpike
Soaring costs for Pennsylvania's public employee pensions are draining money from school district taxpayers, college students and Pennsylvania Turnpike motorists.
The cost to taxpayers of funding pensions for government and school employees is raising the price tag of everything from social services to prisons, but the squeeze is most apparent at agencies that rely on tuition, property taxes and tolls to help underwrite the increases. The state's $1.6 billion in contributions to its two pension funds last year will grow to $2.2 billion this year as officials attempt to fill a $50 billion hole in the funds stemming from years of market losses and legislative underfunding.
“You will see (public pension cost increases) this year and for years to come,” said Sue Menditto, director of accounting policy for the National Association of College and University Business Officers. She likened it to the spike in heating costs that families pay during a severe winter.
“It's almost like a bad winter coming for the next 15 years,” she said.
Indiana University of Pennsylvania senior Rodney Scott has struggled to make ends meet as he pursues a degree in finance and legal studies.
This fall, Scott, 22, is among 200,000 students at Pennsylvania public universities who will have to hustle as pension costs help drive tuition higher at the 14 schools in the Pennsylvania State System of Higher Education and Penn State.
At the state system schools, such as Indiana, a $17 million bump in public pension costs works out to about $150 more per student this school year. At Penn State, a $19.7 million increase in pension payments comes to about $200 more per student.
At the Pennsylvania Turnpike Commission, which relies on tolls to operate the roadways, a $5.6 million increase in state pension costs was among the factors the commission cited in its decision to raise tolls by 5 percent Jan. 1.
Nearly one-third of the state's 501 school districts cited rising public pension obligations in their applications to increase property taxes above a statutory cap for the 2014-15 school year.
At Franklin Regional School District, where pension costs spiked $1.2 million this year, officials tapped reserves to keep their tax increase to 0.83 mills and avoid layoffs or program reductions.
“At the same time, we realize this trajectory isn't a pleasant situation for anyone,” Assistant Superintendent Mary Catherine Reljac said.
Penn Hills School District Business Manager Rick Liberto said pension costs, which increased nearly $2 million this year, coupled with an increase in payments to charter schools, forced the district to look at its options. It has eliminated 100-plus teaching positions, outsourced transportation and vo-tech services and reduced physical education and foreign language offerings, he said.
Gov. Tom Corbett stresses such scenarios in his calls for pension reform.
“This is just another example of why pension reform is needed now. The governor believes that he and the Legislature have the responsibility to the families, students and taxpayers of Pennsylvania to do something to address the spiraling costs and long-term stability of our public and school pension systems. If we do nothing, we put our children's future at risk and their children's future at risk,” Corbett spokesman Jay Pagni said.
Others are quick to note that Corbett's proposed reforms won't impact the $50 billion in unfunded liability.
“The irony in the budget that was just signed is that it continues to underfund the pensions,” said Richard Dreyfuss, a retired actuary who is a senior fellow with the Commonwealth Foundation, a Harrisburg nonprofit that describes itself as a free-market think tank.
Menditto said a change in accounting standards that took effect this year is forcing public pension plans across the nation to quantify and address their long-term obligations.
“All states are coming to terms with measuring the value of their pension promises and measuring the long-term pension costs. It certainly can have a huge impact on public higher education, given that states basically have flat-funded it for the last 10 years,” she said.
Debra Erdley is a staff writer for Trib Total Media. She can be reached at 412-320-7996 or firstname.lastname@example.org.