Is There Any Optimism on the Pension Situation?

Is There Any Optimism on the Pension Situation?

Though it has been clear for some time now, no taxpayer can rest easy if they read some of the comments from "in the know" people on the approaching problems of the state’s pensions system for school employees. Thanks to a formula adopted earlier in the decade by the General Assembly to smooth out the gains and losses of the plan’s finances, the employer contribution rate (paid by the state and the school district) is expected to climb incrementally from 4.78% this year to 33.95% in 2014.

That trajectory-which has been known for some time now-prompted some of the following quotes:

  • "There is no silver bullet to solve this"
  • "It’s scary"
  • "The numbers are really almost unimaginable in terms of the potential impact on taxpayers and school district budgets"
  • "No district in Allegheny County…is able to budget at the 30 percent-plus rate without significant budgetary cuts in other areas or millage increases."
  • "It’s not like you can magically make it disappear"

Worse yet, the existing state law on school spending and school tax growth-Act 1 of 2006-allows school districts to secure an exemption from taxpayer referenda for "increases in retirement payments that rise faster than [the Act 1] index".

The Senate Finance Committee is going to hear testimony on what to do for the teachers’ system and for the state workers’ pension system (it too is expected to face rate hikes). Many of the same suggestions that arose in this past fall’s municipal pension reform effort will be raised and no doubt some of them (such as moving to defined contribution system for employees hired after a certain date) will face opposition from the teachers’ union the same way the public safety unions opposed the municipal effort.