School Can't Support Pensions

This one really comes as no surprise, an article in the Express-Times discusses NASD’s concern that it won’t be able to fund the teacher pension.


The article includes some figures, but to understand this better, in PA, the employee makes a pension contribution, and so does the school district and the state.


Since the employee’s pension upon retirement is based on an average of the highest years of salary, and not based on the amount of money contributed to that individual, the system will inevitably fail.


Most private companies now rely on 401K programs and the employee and/or the employer will make a contribution. These are not guaranteed and the employee will only get what he/she has put into the system (and as we know it can fluctuate greatly depending on the stock market). The implementation of the 401K was a lesson learned by companies from those industries (steel, auto, etc) whose pension programs failed.


So why are the schools still trying to make a system work that has failed throughout the private system?


The reason is simple. It is a great pension that the teachers’ union will not give up, and it is not only teachers, it is all PA employees including those in Harrisburg.


In the article it notes that, “Prior to July 1983, employees contributed 5.25 percent of their salary and those who joined PSERS after paid 6.25 percent.”


PSERS is the PA State Employees Retirement System.


And for employers, the increases are magnifying in order to fund the pension:


For the 2010-2011 school year, the PSERS board increased employer contributions to 8.22 percent, a 72 percent increase over the prior school year.


The rate spike for 2012-2013 is projected to increase from what was originally scheduled at 11.23 percent to possibly a 16 percent increase or as much as a 29 percent increase.


The school districts are calling for the state to assist. To their credit, the article notes, “Superintendent Victor Lesky said the Bangor Area School District has approved a resolution asking the state legislators to either amend the state Public School Employees' Retirement Code by limiting eligibility, funding levels or the extent of benefits so that the employer contributions will be substantially cut or provide other sources of state revenue to the schools.”


Most likely the system won’t change because it would impact those in Harrisburg as well as the teachers. In the end the taxpayer is going to foot the bill and fund the difference.

FROM ROSS NUNAMAKER