With huge pension system losses budget situation won't get any better soon
WESTFALL As Delaware Valley officials scrambled for 2009-10 budget answers this week, an even more oppressive financial problem loomed in the near future. The national financial crisis impact on Wall Street has all but decimated Pennsylvania’s public employees and public school employee pension system investments. The Public School Employees’ Retirement System (PSERS) investments, which benefit teachers and other school employees, fell 29.7 percent in 2008, according to the Associated Press. The school retirement plan in February reported a six-month loss in value of $17.3 billion to $45.4 billion from the beginning of the state’s fiscal year on July 1 to Dec. 31. A dollar total for the year was not immediately available. DV Budget and Finance Committee Chair Ed Silverstone called it a “melt down.” The state traditionally pays the bulk of the retirement fund, up to 60 percent, while school districts have paid a small percentage. This coming year, PSERS board has determined a 2009-10 local rate of 4.78 percent of the payroll; $2.33 million for DV. Rates had fallen during good, “bull” market years, Delaware Valley Business Manager Bill Hessling said. “(State pension officials) thought they were going keep getting back 8 percent on their investments forever,” he said. Those days are over and low rates won’t continue either. Hessling said that accounting and actuarial formats used by PSERS will begin to show the damage of recent losses after about two years. The teachers’ pension fund has already projected its rate spike could exceed 28 percent for the 2012-13 year. If that occurs, the pain will be felt acutely by people who pay property taxes to fund school districts. “No school district is going to be able to support those kind of numbers. (PSERS) is going to have to make changes in their formula,” Hessling said. Juggling alternative budget proposals Tuesday evening, Hessling recommended that the Delaware Valley School board prioritize a rate increase of almost one-third , to 7 percent to the retirement system. “We’re in better shape than many districts and we couldn’t afford (massive increases)... Still, we’re trying to address this, which is more than the state is doing,” Silverstone said. Superintendent Dr. Candis Finan said the district has some control in that the costs are determined by the number of district employees. “If enrollment continues to decline, we’re going to see a different composite of employees,” she said. Pennsylvania’s other big retirement program is the State Employees’ Retirement System SERS. For most people enrolled in the State Employees’ Retirement System, the government is their employer. SERS valued its investments at $24 billion as of Dec. 31, a decline of $11.5 billion for the year. The system predicted that employer contributions could approach 29 percent of payroll by 2012. The current employer contribution rate is 4 percent of payroll.