Rising Pension Costs
Posted: Friday, January 3, 2014 1:30 pm | Updated: 2:16 pm, Fri Jan 3, 2014.
The cost of school pension plans increased 42 percent last year with most local school districts forking over millions of dollars more for retirement plans, according to a new report by Temple University’s Center on Regional Politics.An analysis conducted by the university found that the overall cost of school retirement plans increased by a combined $12 million in a single year for the 13 districts in Bucks County.A similar increase was reported in Montgomery County and across the Philadelphia region. The amount paid out by all 62 southeast Pennsylvania school districts was found to be up $61 million over the prior year, according to the report, which forecasts even higher payments to sustain retirement plans in the future.
According to the study, Central Bucks paid out nearly $8.3 million in pension contributions for the 2012-13 school year, as compared to just $5.7 million during the prior school year. Officials in Central Bucks said a tax hike was avoided this school year by refinancing debt and eliminating or outsourcing more than 600 positions from its $290 million budget.
In the Neshaminy School District, pension costs rose 40 percent, or $1.2 million, in a single year, according to the report. Neshaminy said it kept taxes stable this school year after drawing about $5.8 million from its savings.
Bensalem’s school district also drew from savings − taking nearly $7 million from its reserves – to avoid a tax hike. Pension costs there rose 44 percent with the district paying $989,699 more than it paid the previous year.
The greatest increase, percentage-wise, was in the New Hope-Solebury School District. Pension costs there nearly doubled, from $686,123 in 2012 to just more than $1 million in 2013.
New Hope-Solebury homeowners paid $82 more in school taxes on the average assessed home in 2013, officials said. At the same time, the school board also drew $1.7 million out of reserves to balance the fiscal year 2012-13 budget.
Pennsylvania’s school pension plans are funded through a mix of employer and employee contributions. Currently, the plans cover an estimated 267,428 active members while another 209,420 former employees collect an annuity, according to the state.
Active employees typically contribute between 7.5 percent and 10.03 percent of their paychecks toward retirement. As the employers, the state government and local districts also make regular contributions to keep the plans afloat.
In the 2012-13 fiscal year, the Temple University study found that local districts covered about 44 percent of the employer contributions to the pension funds. The state covered the remaining 56 percent.
Those funds were once flush with cash 15 years ago before the state and local school districts drew back on contributions. Reducing the amount in government contributions over the past decade freed up more money for schools and helped balance budgets, officials said.
The recession caused the market value of pension funds to drop from a height of $67.2 billion in 2007 to a low of $43.1 billion by 2009, according to the latest actuarial analysis reported by the state in June.
At the same time, the number of retirees on the plans is growing. So is the annual pension benefit for retirees.
In 2004, an estimated 151,122 retirees received payments of $18,646 annually, according to the actuarial analysis. Nine years later, the system is serving some 209,240 beneficiaries who each receive payments of $24,603 per year.
It’s a recipe for disaster, notes Joseph McLaughlin, director of the Center on Regional Politics at Temple.
“Modest increases in the state basic education subsidy in the wake of the recession have been overtaken,” McLaughlin warned. “Even steeper pension funding increases loom in the future for the commonwealth, school districts and municipalities, all supported by the same taxpayers.”
According to the study, Central Bucks paid out nearly $8.3 million in pension contributions for the 2012-13 school year, as compared to just $5.7 million during the prior school year. Officials in Central Bucks said a tax hike was avoided this school year by refinancing debt and eliminating or outsourcing more than 600 positions from its $290 million budget.
In the Neshaminy School District, pension costs rose 40 percent, or $1.2 million, in a single year, according to the report. Neshaminy said it kept taxes stable this school year after drawing about $5.8 million from its savings.
Bensalem’s school district also drew from savings − taking nearly $7 million from its reserves – to avoid a tax hike. Pension costs there rose 44 percent with the district paying $989,699 more than it paid the previous year.
The greatest increase, percentage-wise, was in the New Hope-Solebury School District. Pension costs there nearly doubled, from $686,123 in 2012 to just more than $1 million in 2013.
New Hope-Solebury homeowners paid $82 more in school taxes on the average assessed home in 2013, officials said. At the same time, the school board also drew $1.7 million out of reserves to balance the fiscal year 2012-13 budget.
Pennsylvania’s school pension plans are funded through a mix of employer and employee contributions. Currently, the plans cover an estimated 267,428 active members while another 209,420 former employees collect an annuity, according to the state.
Active employees typically contribute between 7.5 percent and 10.03 percent of their paychecks toward retirement. As the employers, the state government and local districts also make regular contributions to keep the plans afloat.
In the 2012-13 fiscal year, the Temple University study found that local districts covered about 44 percent of the employer contributions to the pension funds. The state covered the remaining 56 percent.
Those funds were once flush with cash 15 years ago before the state and local school districts drew back on contributions. Reducing the amount in government contributions over the past decade freed up more money for schools and helped balance budgets, officials said.
The recession caused the market value of pension funds to drop from a height of $67.2 billion in 2007 to a low of $43.1 billion by 2009, according to the latest actuarial analysis reported by the state in June.
At the same time, the number of retirees on the plans is growing. So is the annual pension benefit for retirees.
In 2004, an estimated 151,122 retirees received payments of $18,646 annually, according to the actuarial analysis. Nine years later, the system is serving some 209,240 beneficiaries who each receive payments of $24,603 per year.
It’s a recipe for disaster, notes Joseph McLaughlin, director of the Center on Regional Politics at Temple.
“Modest increases in the state basic education subsidy in the wake of the recession have been overtaken,” McLaughlin warned. “Even steeper pension funding increases loom in the future for the commonwealth, school districts and municipalities, all supported by the same taxpayers.”
