Pension fund debt worries continue

David Hulse
Posted 8/21/12

DINGMAN, PA — If you want to get Delaware Valley School District (DV) board member Jack Fisher’s attention, just mention Public School Employees’ Retirement System (PSERS) and then stand …

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Pension fund debt worries continue

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DINGMAN, PA — If you want to get Delaware Valley School District (DV) board member Jack Fisher’s attention, just mention Public School Employees’ Retirement System (PSERS) and then stand back.

Fisher, who chairs the board’s audit and finance committee, has been talking about the financially troubled system and its impending impacts on the district for several years, as he pushed for larger budget set-asides and new taxes needed to fund them.

On December 18, he reported that DV’s liability to PSERS will grow to $100 million by the end of the year. That is approximately three times the district payroll.

In the early 2000s, the $53 billion

PSERS was overfunded, and the legislature dropped the necessity for local contributions and subsequently set contribution rates artificially low.

In the meantime, school staff salaries increased and the recession deeply cut the value of system investments.

The numbers and the debt have markedly increased since 2011.

Board President Zachary Pearce provided numbers, saying the district contribution increased from 16.9% of the payroll to “a little over 20% this year and is now jumping to 25% (in 2015-16).”

Past projections by PSERS would increase the rate to over 29% in 2016-17 and then grow about 1% annually until topping out at 33.27% in 2035.

With these rates, educators are wondering about how much will be left for instruction.

Fisher said the situation gets worse in 2015, with implementation of new government auditing standards for pension monies.

Currently, the long-term debt toward PSERS does not show on DV’s financial reporting, the documentation required for borrowing. Next year it will be included. “Our equity ratio is very good now. Next year it will be terrible,” Fisher said.

If all that did not provide enough concern for financial planning, state legislators are also considering changes in the way basic state aid to school districts is distributed.

The Commonwealth has no basic aid formula, and in recent years districts needing to complete budgets by June 30 have needed to guess at numbers, as legislative budget debate on the year’s aid amount runs past the end of the fiscal year.

Late last month, Superintendent John Bell testified before a legislative commission studying aid reform and how to distribute it.

In part, Bell is looking for some stabilization, without the loss of incentive aid that the district receives for its low per-pupil education costs. Bell is calling for a “hold-harmless pledge” from legislators so that these incentives, amounting to 15% of DV’s state aid, are not lost. “If this money isn’t factored into Delaware Valley’s base allotment in a new formula, the effects would be devastating,” he told the commission.

“How the formula is treated will decide it,” Bell told the school board last week.

Picture:

Delaware Valley School District board member Susan Schor is pictured on December 18 as she submitted her resignation from the board. Schor said she regretted that work issues forced her to leave the board. Schor was starting her seventh year on the board, having been re-elected to a new four-year term in 2013. The board agreed to call for candidates to fill the position through 2015, when candidates would run for an elected two-year term. Resumès and cover letters will be accepted by the district business manager through 12 noon on January 7. The board scheduled a 6 p.m., January 8 meeting at the district administration building to interview candidates and select Schor’s replacement.

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