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School employees retirement system burdening already strapped districts in Pa.

April 11, 2012|By JENNIFER FITCH | waynesboro@herald-mail.com

WAYNESBORO, Pa. — Franklin County school officials say higher costs associated with the Public School Employees’ Retirement System are burdening districts already facing increased operational costs and stagnant revenues.

In the early 2000s, Pennsylvania school districts contributed as little as 1.09 percent of total payroll into the state pension system.

That percentage increased to 12.36 percent for 2012-13 and is expected to continue rising in coming years because the system is required to maintain growth.

“This isn’t a one-, two- or five-year problem. It’s a generational problem that will require significant sources of revenue to cover this liability over the next 20 years,” said Eric Holtzman, business manager of the Tuscarora School District.

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On average, employees contribute 7.4 percent of their gross pay into the system.

By 2016-17, combined payments from employers and employees will total $330,000 for every million dollars of salary, Holtzman said.

The projected employer contribution rates stay above 27 percent from 2018-19 to 2034-35, he said.

The state reimburses school districts for half of their annual PSERS expenditure.

The Pennsylvania General Assembly made changes to the pension plan affecting employees hired after July 1, 2011. New employees participate in “shared risk” with rates that fluctuate with performance of investments.

PSERS applies to all school district employees, including teachers, administrators, cafeteria workers, bus drivers and support staff.

PSERS, the country’s 16th largest state-sponsored defined benefit pension fund, had net assets of $47.7 billion as of Sept. 30, 2011, according to www.psers.state.pa.us.

The fund has more than 279,000 active members and an additional 194,000 people receiving benefits.

Some school districts are setting aside money now to prepare for the higher payments.

The Greencastle-Antrim School District set aside $740,000 for future PSERS payments, district Business Manager Richard G. Lipella said.

Tuscarora School District assigned $1.2 million for that purpose, Holtzman said.

Waynesboro Area School District has $5 million in fund balance, which is similar to a savings account, but that money is not earmarked for any specific purpose, district Business Administrator Robert Walker said.

The school board’s practice has been to spend that money on one-time expenditures for things like capital projects.

The Chambersburg Area School District “has set aside $606,300 for future contributions.

The remainder — much greater than the amount set aside — must come from future general fund revenues,” said Steven Dart, Chambersburg’s business administrator.

Franklin County school business managers all said the anticipated rate hikes will place continued financial pressure on districts, possibly leading to further cost-cutting or increased taxes.

“School districts always face such choices (regarding cuts or taxes), but adding the retirement contribution cost increases to all of the other education needs places a greater burden on the budget process,” Dart said.

“It will be difficult for all districts,” Walker said.

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