Thursday, March 18, 2010

School Can't Support Pensions

This one really comes as no surprise, an article in the Express-Times discusses NASD’s concern that it won’t be able to fund the teacher pension (read the article here).

The article includes some figures, but to understand this better, in PA, the employee makes a pension contribution, and so does the school district and the state. 

Since the employee’s pension upon retirement is based on an average of the highest years of salary, and not based on the amount of money contributed to that individual, the system will inevitably fail.

Most private companies now rely on 401K programs and the employee and/or the employer will make a contribution.  These are not guaranteed and the employee will only get what he/she has put into the system (and as we know it can fluctuate greatly depending on the stock market).  The implementation of the 401K was a lesson learned by companies from those industries (steel, auto, etc) whose pension programs failed.

So why are the schools still trying to make a system work that has failed throughout the private system?

The reason is simple. It is a great pension that the teachers’ union will not give up, and it is not only teachers, it is all PA employees including those in Harrisburg.

In the article it notes that, “Prior to July 1983, employees contributed 5.25 percent of their salary and those who joined PSERS after paid 6.25 percent.”

PSERS is the PA State Employees Retirement System.

And for employers, the increases are magnifying in order to fund the pension:

For the 2010-2011 school year, the PSERS board increased employer contributions to 8.22 percent, a 72 percent increase over the prior school year.

The rate spike for 2012-2013 is projected to increase from what was originally scheduled at 11.23 percent to possibly a 16 percent increase or as much as a 29 percent increase.

The school districts are calling for the state to assist.  To their credit, the article notes, “Superintendent Victor Lesky said the Bangor Area School District has approved a resolution asking the state legislators to either amend the state Public School Employees' Retirement Code by limiting eligibility, funding levels or the extent of benefits so that the employer contributions will be substantially cut or provide other sources of state revenue to the schools.”

Most likely the system won’t change because it would impact those in Harrisburg as well as the teachers.  In the end the taxpayer is going to foot the bill and fund the difference.

Posted via email from Ross Nunamaker


Clem said...

It can change, but we have to elect new people with courage. New leaders who go to Harrisburg with the intention of ending the insane fleecing of taxpayers. Leaders who have no interest in staying for life and enriching themselves at the expense of their constituents, not the smiling Craig Dally or Joe Brennan types who think being a legislator is about feel good legislation, proclaimations, speaking to third graders and just being generally all around nice guys.

Everyone wants to say the problem is just too big to solve. It is really very simple. Do to the public pension plan what has been done to private sector pension plans when they became unsustainable.

Eliminate the defined benefit plan, and reduce benefits to those currently drawing those pensions. Eliminate, or require significant payment by the recipient for, the lifetime healthcare. Replace the fixed pension with the defined contribution plans. This happens in the private sector all the time. Public employees, contrary to their narcissistic belief, are not more deserving than any of the taxpayers who fund them.

It is not a complex problem, anyone who can budget their household expenses can see what is needed. Only the will to stand up to the trough feeders is required to proceed:

First, vote out everyone who supports the status quo i.e., just get more money somewhere. Then a vote to change the laws. When the unions threaten strikes or otherwise attempt to deny the will of their benefactors, declare the pension plans insolvent (they most certainly are) and toss them to the PBGC. If that solution is good enough for the steelworkers, autoworkers, miners, textile workers and others who have funded luxurious public retirement benefits, it ought to be good enough for their employees.

This isn't a Democrat vs. Republican conflict. Like the midnight pay raise, there are plenty from both sides who will continue to give themselves whatever they want as long as we allow it. This is about public employees being accountable responsible and subordinate to their employer.

Elyssia said...

Well said, Clem. Thank you.