Tired of ads? Subscribers enjoy a distraction-free reading experience.
Click here to subscribe today or Login.

Timothy Allwein, Pennsylvania School Boards Association, talks issues.

S. John Wilkin/Times Leader

David Salter, director of public relations, Pennsylvania School Boards Association, makes a point.

WILKES-BARRE – According to officials of the Pennsylvania School Boards Association, this story writes its own dire headline: “Pension System Busted: Astronomical Tax Increases Expected!”
That, in a nutshell, is the message delivered to newspapers by association Assistant Executive Director Timothy Allwein and Public Relations Director David Salter. The pair visited The Times Leader editorial board Tuesday to drum up discussion about a looming increase in the amount school districts pay into the teacher pension fund, expected to climb as much as 600 percent and stay at those levels for decades.
“I think people have to become aware of it, and the more people who are aware of it the more pressure they can put on legislators to fix the problem,” Allwein said.
The teacher pension is funded by contributions from employers and employees – calculated as a percentage of salary – and return on investment of the fund. The employee rate is fixed at about 7.5 percent, but the employer rate, split between state and local district, rises and falls depending on investment returns.
But investments tanked in the market crash, losing tens of billions of dollars. This year the employer rate rose from 4.758 percent to 8.22 percent. By 2014-15, it is expected to peak at 33.6 percent.
In Wilkes-Barre Area School District, Allwein said, that means the district would have to come up with $8.2 million in the peak year, compared to a bit more than $1 million last year. He predicted districts will be unwilling to raise taxes by 20 percent or more to cover such costs.
PSBA has proposed a bill now in the House and Senate that reduces benefits from 2.5 percent of salary for each year worked to 1 percent, and makes that “defined benefits” pension only half the retirement system, with teachers contributing a minimum rate toward a “Defined Contribution” plan, similar to a 401(k), in which the retirement pay would depend entirely on the performance of the investment.
Teacher unions are arguing that the current system helps attract and keep quality teachers, but Salter said, “I don’t know of anyone who wants to be a teacher because of the pension.” Allwein said the unions are balking at any reduction in benefits, but he believes the current economic climate and the looming huge impact of the spike on property taxes gives reform a 50-50 chance at passage.
The proposed bill does little if anything to cut the looming spike, both conceded. Allwein said that problem likely requires a mix of solutions, including finding a fourth source of money for the fund such as expanded sales tax and deferring part of the payment to the future.