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Wayne Independent - Honesdale, PA
  • Is retiree system breaking bank?

  • The issue is the Pennsylvania School Employees Retirement System (PSERS) and contributions from school districts continue to climb.
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  • — It's an issue which resonates throughout Pennsylvania.
    And many observers think it could cause the state to eventually go broke.
    The issue is the Pennsylvania School Employees Retirement System (PSERS) and contributions from school districts continue to climb.
    "We know this is coming," said Greg Frigoletto, superintendent of the Wayne Highlands School District.
    What's coming are steady increases in the amount of money local taxpayers have to supply to the state program.
    This year, the district has to supply 12 percent of the total salaries from the district. That translates to $1.4 million, up $450,000 from the previous year. Next year, an additional $550,000 on top of that will have to be sent to Harrisburg.
    By the 2017-18 school year, districts will have to contribute 24.5 percent.
    Jeff Firmstone, business manager for the district, said the system worked well when the financial markets were growing with leaps and bounds.
    In fact, Firmstone said the Pennsylvania system continues to receive high marks for how it is managed. However, that still doesn't translate into more money coming into the system, especially following the stock market crash and subsequent recession which continues to plague the markets.
    Firmstone did say that in 2010, the legislature put in a new system for employees coming into the program. But for employees already in the program, it remains the same.
    Employees contribute 7.5 percent of their pre-tax wages to the system. When they retire, they can then draw out of the program.
    According to the PSERS website, employees draw around 70 percent of their average salaries for the three highest years of their career.
    For example, if a person's three highest years averaged $65,000, they would then be entitled to $45,000 per year for retirement.
    Page 2 of 4 - As Firmstone pointed out, when the stock market was strong, it meant the state and local contributions were not as much because the system was making much more investment income. But the interest rates at all-time lows and investment returns down, it means taxpayers have to pick up the difference.
    And even though the state does pay for half of the 12 percent of salaries which is required for this year, it's still funds which come from all taxpayers in Pennsylvania.
    One thing which has to be stressed is this is a state-mandated program. There is absolutely no local control.
    During its most recent meeting, the local school board voted to earmark excess funds from the current budget to go into the retirement account. Frigoletto said this is critical because they know the increases from the state are coming and they are trying to do everything they can to ease the local burden.
    "That money is only to offset future costs," said Frigoletto.
    Frigoletto also said he believes the local district and board have been "fiscally responsible" over the years in managing the budget as well as contributing to the retirement system.
    As an example, he said the district has traditionally had a very high bond rating meaning that when money needs to be borrowed, it can be done so at the lowest possible rates.
    He also pointed out that Wayne Highlands has been highlighted by the state as being a "low spending, high achieving" district.
    But all of that may not matter to taxpayers, who have witnessed steady tax increases over the past couple of decades.
    That's where the state legislature comes into the picture. It's the lawmakers who would have to make any changes in the funding formula, something they have been hesitant to do over the years.
    Frigoletto did say he thinks the local district has a "great relationship" with the elected officials who represent this area in Harrisburg.
    Page 3 of 4 - Talk recently has turned to a possible alternative to the current property tax system. A meeting was held recently in Honesdale featuring Sen. Lisa Baker who said lawmakers are considering such a proposal.
    But as Baker pointed out, any changes would mean raising the sales tax and other revenues to offset the property taxes which currently fund public education.
    "We would love to find if there is a better way to fund public education," said Frigoletto.
    Frigoletto also said that revenue sources from the state have, at best, stayed level over the past several years while the demands have risen.
    He said that means finding the funds is "increasingly local."
    For example, the state used to fund special education almost fully. However, he said that funding has not been on the rise and that means local taxpayers have to make up the difference.
    "Our costs rise and the revenue side does not change," said Frigoletto.
    And the thing with special education, said Frigoletto and Firmstone, is there are absolute rules in place which have to be followed. The problem is those rules don't always come with funding.
    However, Frigoletto said even with the mandates, the district needs to provide the education which is required. That, he says, is the number one goal.
    "It's the right thing to do," said Frigoletto.
    He noted that the No Child Left Behind law, though controversial and in some cases impossible to meet, has had some positive impacts. He said it has made the attention on each child "much greater."
    That, he said, puts a focus on educating all children.
    "Every kid does matter," said Frigoletto.
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