Local superintendents say the state pension reform bill signed into law earlier this week will not provide any immediate relief to school districts.
Under the changes, there is a new, full-defined contribution 401k-style plan option, and more than $10 billion dollars will be saved on Pennsylvania’s unfunded pension liability and fewer dollars will go to Wall Street brokers.
“The bill is necessary, but does not help districts in the short term,” said Otto-Eldred School District Superintendent Matt Splain. “It will not change the pension costs that districts face or the under funded state system that is eating up state revenues. The poor decisions of the past will haunt us for quite some time.”
In fact, this year school districts will see the pension contribution rate jump 2.54 percent to 32.57 percent, said Smethport Area School District Superintendent David London. By 2021-22, the projected rate will be 36.4 percent, he said.
“These high contribution rates cause large budget increases in local school districts including Smethport,” London said.
London said that funding will have to be found or budget cuts will have to be made to make up for the increases.
“To make an immediate impact, the general assembly needs to pass legislation to increase the contributions of current public employees,” St. Marys Area School District Superintendent Brian Toth said. “Additionally, the general assembly needs to pass legislation to increase state revenues. Making cuts will no longer work.”
Alterations in the state retirement system had to happen, he said. But he reiterated that the financial impact won’t be felt by school districts for many years, Toth said.
“Also, the legislation will hinder us in being able to obtain and retain the most talented educators for our students,” Toth said. “It is also clear that the legislature considers the state police and prison guards to be more important than educators.”
The changes should be implemented for all state employees, he said.
“Historically, educators were not compensated at the level of other college educated and state certified professionals,” he said. “Therefore, to compensate, the state implemented a retirement system that would attract the best and brightest.”
London shared similar thoughts.
“Rural districts often struggle to find highly qualified and trained teachers in specialized areas as well as substitute teachers,” he said. “Couple that issue with a nationwide teacher shortage and we all could experience difficult times at replacing and retaining teachers for our students in areas like math, science, foreign language, STEM [Science, Technology, Engineering and Math], special education and others.”
John M. Callahan of the Pennsylvania School Boards Association said that the intention of Senate Bill 1 is to put employees’ retirement system on what he calls a viable path that will cut investment risk by 53 percent or $15.5 billion over time.
“This plan protects taxpayers from jarring tax increases and/or draconian program cuts. Senate Bill 1 ensures that our schools will have a retirement plan that is both competitive and sustainable,” he said.
State Rep. Martin Causer, R-Turtlepoint, called the new law a huge step forward in an attempt to slow down the growth of pension liabilities, move risk away from taxpayers and make sure the Commonwealth can meet its future pension obligations.
“Act 5 of 2017 will help ‘stop the bleeding’ by modifying the current retirement system for all state and school employees hired in 2019 or later,” he said. “It will not lessen the current unfunded liability, so there is more work to be done. But this law is a significant step in the right direction.”
To that end, London said, “I know that this bill moved quickly and our legislators along with Governor Wolf did what they could to improve the ‘pension crisis.’ Time will tell if it was enough and if it works out.”
