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Lancaster County residents recently read that most county school districts were granted permission by the Pennsylvania Department of Education to raise property taxes above state-mandated Act 1 levels next year.
While school board members are working diligently to keep taxes within the 3.4 percent average limit for 2010-12 originally imposed by Act 1, they now find themselves confronted with making numerous cuts to proposed budgets, ranging from reducing staff, including teaching positions, to eliminating extracurricular programs or postponing maintenance efforts. Why such increases when the nation is just beginning recovery from deep recession and we find ourselves in a period of virtually no inflation? The answer can be found in state funding for public education and, particularly, rising pension costs.
How have we gotten to this point? In the late 1990s, given the strength of the stock market, Pennsylvania's pension plans were strong financially, and the Legislature implemented several initiatives reflecting the conviction that such growth would continue. In 2000 the General Assembly determined that the employer contribution rate toward teacher pensions (Public School Employees' Retirement System, or PSERS), which historically has been shared equally by the state and individual school districts, could be reduced to zero. This was followed by dramatic increases in pension benefits of 25 percent for Pennsylvania teachers and employees in 2001 and shortening the years of service required for vesting. Cost-of-living adjustments were also provided to retirees.
The Pennsylvania State Education Association rightly notes that its employees have always contributed to the pension fund and these contributions were increased from 6.25 percent prior to 2001 by 1.25 percent. The contribution rate remains 7.5 percent today. Given the 25 percent increase in benefits coupled with the inclusion of retroactivity of benefits for current members awarded by the General Assembly, however, this increase provides little assistance in meeting such generous pension obligations.
It didn't take very long to reverse such stock market successes. We have been struggling as individuals and as a nation with making ends meet, but school costs, especially the pension liability and related benefits for teachers have not been addressed and adjusted accordingly to these new economic realities. The extent to which school district budgets will be stretched to meet the demands of these commitments remains unknown, but it is anticipated the bill could increase dramatically over the next several years.
This increase in pension costs requiring much higher employer contribution rates has been called a "spike" by many, but the Pennsylvania School Boards Association has noted that speaking of a "spike" implies a rate which jumps but then quickly returns to lower levels. Instead, what we anticipate is a great increase in rates, more than 700 percent in the next several years, as the ECR would increase from the current 4.78 percent to 33.60 percent in 2014-15. It then will plateau for approximately 20 years where the rate will exceed 20 percent.
Given these severe economic challenges, school board members find themselves in unenviable and extremely daunting circumstances over which they have little to no control.
1. School boards does not set the ECR. It is set according to state law.
2. School boards have no voice in cost-of-living adjustments. These are established by the Legislature.
3. School boards must fulfill mandates decreed by the Legislature, including many that are either partially or fully unfunded.
In addition to addressing such fiscal constraints, our school board members know full well that their primary responsibilities include:
1. Assuring the academic success of all students. This includes providing an educational program that prepares students for success on the Pennsylvania Assessment of School Achievement tests. And, beginning preparations for student success on the newly developing Keystone Exams.
2. Focusing on high school graduation for all students, as an educated public is vital to a vibrant democracy.
3. Preparing students for post-secondary educational endeavors or beginning workplace requirements.
4. Maintaining a safe and healthy school environment.
In meeting their responsibilities to the citizens of their communities, school boards are confronted with essentially two choices: cut programs, staff and services or raise taxes. Given current fiscal constraints, the realities of the economic impact on property owners will prove devastating. Therefore, all of the primary responsibilities school boards face must occur WITHOUT RAISING SCHOOL TAXES (or as the Legislature has decreed, without raising taxes above specific annual limits).
Our school board members are elected, unpaid, volunteers who devote significant time to their mission. Yet their hands are tied. Given the unparalleled challenges with which they are confronted and the limitations of their autonomy to drive sound decision-making, it is likely that they will be labeled the culprits of financial mismanagement, when, indeed, they are the victims. They are in the worst possible position — the middle. And, ultimately, it will be our citizens and students who will suffer.
It is imperative that the Legislature address the pension issue this current budget year. The longer the situation is ignored, the worse it will become. And, the more difficult to address.
This is the latest in a series of commentaries by the Hourglass Foundation, a local, nonpartisan think tank.
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