About DCTC...

The Delaware County Taxpayers Coalition (DCTC) is an independent, nonpartisan membership organization dedicated to the elimination of school property taxes as the funding source for public schools. Founded in 2009, DCTC believes the existing property tax system is unfair, unmanageable and costly to administer and needs to be replaced as the method to fund public education.  The DCTC carries out its mission by:

• Maintaining a Website that provides background information, articles, position statements, references sources that relate to school property taxes (SPT)
• Monitoring and reporting on news articles relating to SPT
• Monitoring and reporting on legislative activity relating to SPT
• Monitoring and reporting on research papers relating to SPT
• Providing speakers on SPT
• Supporting legislation that eliminates SPT while adequately funding public education
• Maintaining a data base of groups and organizations that want to be informed on the SPT issue.

Morning Call article 2/4/10 on school pension funding issue
by R. Paul Baumgartner of Telford is a member of the Souderton Area School Board

Pennsylvania Legislature should fix public school employee retirement system mess

The Public School Employees Retirement System fund balance is ominously low on cash. As a result, unless something dramatic is done, you will see a spectacular increase in your school district real estate tax just to bring the pension fund back to health beginning this year. Why? Whose fault is it? What's the bottom line? What can be done about it?

As a director for three education entities -- the Souderton Area School District, the Montgomery County Intermediate Unit and the Pennsylvania School Boards Association -- I would like to share some facts together with my personal perspective. In doing so, I am not officially speaking for any of these entities.

There are two major causes for this serious shortfall in the retirement system fund balance: legislative tampering and the current market downturn.

With respect to legislative tampering, a self-serving General Assembly in 2001 introduced legislation to increase its own pensions by 50 percent and in so doing increased active school employees pensions by 25 percent. I understand the enabling legislation zipped through both chambers with no debate. School employee retirees, left out of this deal, convinced our legislators in 2002 to provide them with a healthy cost-of-living adjustment.

Keep in mind both of these actions placed a very significant actuarial burden on the retirement fund because neither the employees nor employers, through no fault of their own, had been funding the plan for these increased benefits. Conventional wisdom has it that our legislators justified their actions by believing a healthy market would in itself make up the shortfall. However come 2003 -- facing the specter of significantly higher payments into the pension system by school districts and state government -- our worried lawmakers enacted legislation that pushed back paying much of it for 10 years.

Whose fault is it? Frankly I have a major problem with legislative intrusion into our public pension funds. As a school board director, I along with the other directors have a direct responsibility to our constituents and taxpayers to provide an affordable and quality public education. We provide revenue primarily by setting real estate tax rates to cover expenses, including pensions. In this situation, our legislators have forced us to incur a significant expense that I for one would have never approved. These three actions, raising pensions, providing COLAs and deferring payment into the pension fund are all unfunded mandates imposed on your school districts by your state legislators.

What will this cost you? Exact figures are a little difficult to come by, but the Commonwealth Foundation recently offered the following calculations. This year, local school districts will collectively pay more than $296 million into the pension fund based on 4.78 percent of salaries. When the 10-year extension expires in 2014, the school districts will pay more than $2.3 billion based on a whopping 33.5 percent of salaries. It does not stop in 2014; it continues for at least 10 years in the plus-30 percent range and does not drop below 25 percent for years to come. For Souderton in 2013-14, it is estimated our increase in pension payments will exceed $7 million, resulting in an average real estate tax increase per homeowner of $464. This represents 7 percent of our current budget of approximately $100 million. All school districts will experience a similar rate increase. I emphasize these are estimates.

Admittedly this is not all the fault of legislative tampering because our economic downturn also had a significant impact on all pension funds. That said, had our Legislature not mandated pension increases and deferred payments, more funds would have been available to weather the poor market performance. Contrary to some opinions, employees, unions and school districts are not to blame for the reduced payments.

Recognizing the difficulty of sustaining a defined benefit plan over the long term, the state School Boards Association in 2007 developed a hybrid plan combining elements of a defined contribution and defined benefit plan. This plan, now introduced in both the state Senate and House, would provide for reform but only for employees hired after June 30. Current employees would not be affected based on past court rulings that prohibit reduction of legislated benefits. Thus, this legislation would have no effect on the current pension crisis.

What can be done about it? Not much. Your school board will have to increase your real estate tax or cut programs or some of both to meet employee obligations as a result of your legislators' actions. I have one recommendation, in so far as much of the shortfall resulted from the action of our legislators: They should fund much of this increase through the state general fund rather than force your elected school board to increase your real estate tax. My intuition tells me that we can expect some more gimmicks to be advanced, such as borrowing funds to be paid back over time, with the increased expense of interest for bonds or to further push back paying the deficit over more years.

I suggest you contact your legislators and ask them why and what can be done about it?

Don't worry about a busy signal on their telephone; they are rarely overwhelmed with concerned constituents demanding accountability.

R. Paul Baumgartner of Telford is a member of the Souderton Area School Board.