Monday, February 22, 2010

Problems Leading Up to the EASD's Proposed 11.85% Tax Hike: Part II - PSERS

Email a letter to State officials for pension reform to help stop the tax hike!

Posted by: Noel Jones

Once Upon A Time, in 2001, when the economy seemed it would never stop booming, Governor Ridge decided to increase State employee pensions by 50% and school employee pensions by 25%. That's right, 50% and 25%. And who gets to pay for it? That's right--US--the voting taxpayers.  Aside from all the waste and croneyism plaguing the EASD, PSERS, the Public School Employees Retirement System, is the pension system that covers public school employees in Pennsylvania, and the greatest component to the EASD's attempt to squeeze voting taxpayers for an 11.85% increase this year. There is something that we can do about this, though, and a couple of board members have asked for our help in writing our State officials to urge them to make PSERS reform a top priority.  Below is a  letter from the
board that explains more about PSERS--please read it before emailing your letter--at the end is some sample language that you can personalize, as well as the email addresses to our State officials that need to hear from as many of us as possible to make this a priority:

Community Connection
PSERS:  Not Just Another Education Acronym, A Potential Crisis

Every year at budget season the Easton Area School District is trying to determine future costs.  Some are discretionary (supplies and services), some are contractually bound (salaries and benefits), and some are mandated by the state.  Slight changes in any category can tip the scale even in a good budget year.  Dramatic changes in a mandated category risk throwing the entire budget into a tailspin where the educational objectives of a district become difficult to meet.  There is a very real potential of this happening in Easton if the PSERS issue is not addressed. 

The following Q&A excerpts are from the Pennsylvania School Boards Association published "School Leader News" bulletin of January 22, 2010.  The 5th question highlights the problem we face.

What is PSERS?
PSERS, the Public School Employees Retirement System is the pension system that covers public school employees in Pennsylvania.

How is PSERS funded?
PSERS is funded with employer (school employer and state) contributions, employee contributions and investment earnings.

How are the employer and employee contribution rates set?
The employer contribution rate is set each December by the PSERS Board of Directors and is calculated by the system’s actuaries to be the contribution needed to pay for its unfunded liability when combined with the employee contributions. The employee contribution is set by law.

What are the current rates?
The 2009-10 employer contribution rate is 4.78%. The employer rate is split approximately 53%-48% between the commonwealth and school employers. That means that school employers must contribute an amount to the system that is equal to about 2.25% of the payroll for member school employees. The employee rate is 7.5% for most school employees. For some who have been in the system longer, the rate is 6.5%. The employee rate is a percentage of their wages earned as a school employee.

**What are the projected employer contribution rates for the next several years?
The latest unofficial projections are 8.40% for 2010-11; 10.70% for 2011-12; 29.55% for 2012-13; 32.45% for 2013-14 and 33.95% for 2014-15.

Why is the employer contribution rate scheduled to increase by so much?
There are several factors that have contributed to the projected increase in employer contribution rate. First, the stock market, from which PSERS receives the bulk of its investment revenue, has performed very poorly over the last two years. The rate of return on PSERS investments was -26.54% for the fiscal year ended June 30, 2009 (FY 2009) and -2.82% for the fiscal year ended June 30, 2008 (FY 2008) resulting in a devaluation of PSERS assets. Second, legislation approved during the previous decade that increased employee benefits and subsequent legislation, which re-amortized the system’s liabilities had the effect of pushing off liability to the future in exchange for providing fiscal relief to school employers and the commonwealth during recessions at the time. These liabilities are now becoming due.
How can PSERS mitigate these rate increases?
Fundamentally, there are only three things that can be done: 1) increase the funding for the system, 2) decrease or cut the costs of the liabilities of the system or 3) defer the liabilities of the system.
What is likely to happen?
Because the projected increases in employer contribution are so steep, it is likely that all three tools will be used to some extent.
The extent to which they are used will depend on legislative action and the performance of the stock market.

We cannot control the stock market, but we can call for legislative action.  The EASD's Board of School Directors has contacted local and state legislators to discuss the seriousness of this crisis and the impact it will have on school budgets and local tax payers in the near future.  The Pennsylvania School Boards Association has offered potential short and long term solutions. 

Our legislators are asked to devote time and resources to many issues.  It is imperative that this be on the top of their lists.  Please consider contacting your local and state representatives and ask them to make the PSERS crisis a priority.

The following link from the PA School Boards Association provides numerous resources for further consideration:

We recognize that much work lies ahead on our current budget and that cuts are the only way to make ends meet this year.   Our attention to the PSERS issue is not an attempt to divert responsibility for our own internal expenses, but to highlight the extent to which cuts will be necessary year after year if the projected PSERS payment schedule becomes a reality.   

Thank you for your time.
- EASD Board of School Directors


Please send an email, no matter how short, and copy it to each of the State legislators and senators, as well as Governor Rendell, listed below. Here is some sample language:

I am writing to urge your support for legislation, such as HB 2135, that will address the PA Public School Employees Retirement System (PSERS) crisis.  The burden the projections present for school districts and taxpayers is unimaginable.   Our public schools will be forced to make drastic cuts in programming and resources for our children and risk raising taxes to cover mandatory retirement contributions at a time when our economy is at its worst, and many residents have either lost their jobs, taken large pay cuts, or are in danger of losing their jobs and homes.  Please make the PSERS system reform a priority.  This will be an election issue for me.

Thank you.

Legislator Contact Info:
Representative Robert Freeman:
Representative Rich Grucela:
PA Senate:
Lisa Boscola:
Bob Mensch:
Governor Edward Rendell:


Julie Zando-Dennis said...

Informative letter.

We should be mindful however that while the employer contribution rate is roughly doubling from 4.78% 8.40%, the proposed budget increase is 11.85%. Perhaps the steep tax increase anticipates future employer contribution increases and distributes the burden over several years. Not sure. More detail about the 2010-11 budget would be helpful.

Finally, more transparency about EASD's investment strategy is in order. Yes, the stock market performed terribly in recent years, but perhaps the EASD invested inappropriately in high yield/high risk stocks rather than low yield/low risk stocks and bonds. Probably a mixture, but as a public entity investing taxpayer dollars, the EASD should allow scrutiny of its portfolio.

Cathy Stoops said...

Just a question re:expenses for EASD. Do they still have that office to took look after their accreditation? I think they were going to get rid of it. Hope they did cause the whole accreditation process is suppose to be a volunteer effort and is suppose to include all stakeholders including the community. It shouldn't be paid professions.

Cathy Stoops said...

Sorry, meant "it shouldn't be paid professionals."

noel jones said...

Cathy--the answer is yes, and I will be covering that issue in my next installment--Part III.

noel jones said...

Has anyone written letters yet--please post here is you have--thanks! I'm planning to write mine tonight.

repmensch said...

I find your comments right on and this is as accurate an historical account of the situation as I've read to date (I'm not offering comment on school board issues, for or against).
As your State Senator, I welcome hearing from anyone with their thoughts and ideas about this matter, so call Northampton office, 610.250.5624, or my Quakertown office, 215.529.1215, or feel free to write at I'm a tax payer too, and I am as concerned as each of you for each of our financial futures. Sincerely, Bob Mensch, State Senator.

noel jones said...

Senator Mensch, thank you very much for posting--it is refreshing to see a senator reaching out to residents in a public forum, and inviting us to contact you directly with our concerns. As you can tell by browsing this blog, it is largely a rather progressive group of independent thinkers, politically speaking, including Democrats, Republicans and Independents. Concerns about tax increases are weighing heavily on our residents right now in this economic downturn, and even our most liberal residents are concerned with any wasteful spending going on. We appreciate your help on PSERS reform--thank you!

Dennis R. Lieb said...

Glad to hear the Senator weighing in on things in Easton. We can use all the help we can get. Maybe a chat about passenger rail funding in the future?


Sandra Walters Weiss said...

I agree with Dennis and I too was aware that "Neighbors" has a following of politico's. It has been a while since anyone has challenged anything in such a manner. Kudos Sen.Mensch for reading what is a valuable tool for us folks who want to know and become involved in the process of building a stronger Community.And I also know Rep.Freeman is always available to give assistance and feedback.I understand the School District's dilemma and hope that some proactive measures can be taken so that our Community does not become one of those who looses control to the State.Yesterday I read that an entire school fired all of their teachers and this was in Pa.I can't even fathom what a mess that might be! I have spoken with several homeowners who are in danger of loosing their homes due to this proposed increase.I of course informed them of "Neighbors" and the links that have been provided.Julie and Cathy have posed excellent questions and I for one would like to see their concerns addressed and yes,I have written emails to the individuals whom I felt could assist.Thank you Noel for all the work you are doing,I hated to not be able to offer much to those folks that are concerned about the issue but unfortunately Rome wasn't built in a day and it is great to see the proactive approach by"Neighbors"

noel jones said...

Thanks, Sandy. We're doing the best we can to get information out into public discussion--and eventually to public ACTION and depend on residents like you to spread the word. Thanks for doing that!

Martin Jones said...

The 88 teachers fired are in Central Falls Rhode Island. Less than half of the students there will graduate high school. Certainly a wake up call...

Laureston said...

My letters have been sent to all the above.

noel jones said...

Wow, Marty--do you know if it was a situation where the state had to take over the school district? We are currently in danger of that here, and sources tell me that the only reason they haven't is that they've recently taken over Allentown, and are regretting it because it's expensive...

This is why it makes me so mad that we are paying for an accreditation department (AFG) that clearly isn't working to the tune of $500k-$600k/year.

We should cut AFG. See my post on Pat Fisher and the AFG for more on this...

noel jones said...

Larry, thanks! I am still drafting mine--has anyone else sent their letters in? The contact info is at the bottom of the body of this post...I will post another comment once I've sent mine off.

noel jones said...

Ok, I just finished sending my letters! Here, again, is the contact info for our state officials:

Legislator Contact Info:
Representative Robert Freeman:
Representative Rich Grucela:

PA Senate:
Lisa Boscola:
Bob Mensch:

Governor Edward Rendell:

Please post a comment after writing your letters!

Sandra Walters Weiss said...

Yes,I was going to post my error but ya beat me to it,today Tony Rhodin a local reporter and son of the man who started the Journalism program at Moravian College has an article on the Rhode Island School District issue.Thank you Marty for correcting my error.The article is poignantly a reminder to me of having lived through a Teacher strike and a potential wake up call for the Districts who are not living up to the State's standards.As I stated when I blogged at Tony's article site ( Tony Rhodin's Blog) I have all the respect in the world for the Teaching profession and know just how difficult the classrooms of today are but if we as a Community continue to allow the unions to dictate and in a sense hold our children's education in a hostage status then we have failed in our attempts as a Community.On this site we have addressed the issues of nepotism in the District,a Budget spiraling out of control and residents fearing loosing their homes,so am I angry,you bet I am and other folks are too.So I for one have the list and have everyone I know writing a letter.

Noel,you posed the question about the Allentown School District,at about the same time frame as the Allentown District was in the danger zone so to speak, was when the State of Pa. took over the Philadelphia School District and someone correct me if I am wrong, this was when you started to see charter schools popping up and at risk Academy's and alternative schools.Oh boy,they were going to be the answer to all the problems, well some of them have been very successful and others have found difficulty in sustaining themselves and the District is still having difficulty.There are no simple solutions to all of this,I remember living in Allentown and talking to police officers whose sole job at a certain time was hustling the walking students from one location,their school to their homes.This was a proactive approach due to near riots and merchants fears as hundreds of children took to the streets.Sounds like a bit of a problem huh? So,after witnessing all of this and returning to Easton only to find the EASD in the state that it is.....who knows??? It is my feeling that all of this boils down to a level of accountability to the real stake holders of the Community,the tax payers and for heavens sake "our" children.Thank you for allowing me my 2 cents and please feel free to correct any errors or educate me further about these issues.

noel jones said...

A letter to the editor on PSERS reform from today's Morning Call:,0,3350409.story

repmensch said...

Last Thursday evening at the TranquiliTea House we had a good, productive discussion about the issues surrounding the pension problem. But as you each realize, the best solution is not yet completely identified--as a legislator I am still seeking input on ideas of how to best solve the problem. There were some great ideas expressed last Thursday, and if anyone should like to share more with me, feel free to call me, 484.433.5917 (cell) or write

And a special thanks to Noel Jones for putting the event together!

Sincerely, Bob Mensch, State Senator