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Connellsville Area to absorb additional pension costs into budget

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By Judy Kroeger
Monday, April 19, 2010

Next year, the state will require school districts to contribute between 8 and 8.5 percent of its payroll to pensions, up from the current 4 percent. The state sets the rate for each district and tells the districts how much to contribute.

In the Connellsville Area School District, this will represent about $3 million of the district's budget. This year, pensions cost taxpayers $1.5 million of the $66.47 million budget.

Connellsville's superintendent, Dr. David Goodin, said, "We're going to absorb it into the budget, by cutting the pie differently or by cutting expenditures." The increases will continue. "Down the road, it will double a couple of times. It looks like it will be doubling each year up to 20 percent."

Taxpayers across the United States owe public school teacher retirement accounts about $933 billion, nearly triple the amount reported by the plans themselves, a study says.

The $332 billion gap estimated by teacher retirement funds between what they have on hand and the cost of promised benefits is low because it includes an "aggressive" 8 percent assumption on future investment earnings, the Manhattan Institute for Policy Research said in the study released last week. It also doesn't reflect the full cost of stock market losses suffered in the past two years, the New York-based research organization said.

The report, covering 59 plans for 13 million working and retired educators, found that California had the largest unfunded teacher pension liability at almost $100 billion, more than the $42.6 billion reported by the system in January. It's the third study in less than two months to suggest that pension costs of about $1 trillion threaten to overwhelm state and local budgets already crimped by declining tax revenue.

Pennsylvania hasn't paid the recommended annual amount to its school and state employee pension funds in years, and won't for at least another decade if lawmakers adopt a budget proposal designed to spread costs into the future.

Pennsylvania increased benefits for state and school employees and lawmakers in 2001, added a cost-of-living raise for retirees in 2002, and then reduced contributions to the funds and spread costs out over a decade to soften the blow of market declines.

The two-year-old recession has left two-thirds of U.S. public retirement systems with assets worth less than 80 percent of future obligations, a level the Government Accountability Office has said is acceptable, the Center for State and Local Government Excellence said this month.

The institute recommended abandoning traditional defined- benefit pensions for new teachers in favor of 401(k)-style defined-contribution plans. It also urged public systems to adopt the same standards used by private companies.

Of the current school pension plan, Connellsville Area School District Superintendent Dr. David Goodin said, "It's a great pension, but not too many folks have a defined pension plan."

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