PSERS Crisis

School districts across Pennsylvania are bracing for the projected massive increases in their payments to the Pennsylvania School Employees Retirement System (PSERS). PSERS is a defined benefit retirement system that all school employees in Pennsylvania belong to. Currently, PSERS has 272,000 active school employees making contributions to the system and 157,000 retired school employees receiving defined benefits from the system. Upon retirement, a retiree receives a defined retirement pension regardless of the conditions in the economy. To fund such a system, PSERS relies on contributions from school employees and school districts, with the state reimbursing the districts one-half of their cost. Given the very poor economic period over the last few years, PSERS’ investments have not grown at a rate necessary to fund the defined benefits being paid to all of the current retirees without a change in the contribution rate. Unfortunately for school districts, the contribution rate from school employees is fixed at 7.5%. Therefore, to handle poor market conditions and low or negative returns on investments, the only sources of additional income for PSERS are the school districts. Currently, the school district pays PSERS at a rate of 4.78% of each employee’s salary. Based upon a -2.82% investment return for Fiscal Year 2008, PSERS is estimating that the rate for the school districts to be 27.73% for the 2012-2013 school year. If this is allowed to occur, a financial crisis would occur in every school district in the Commonwealth. I urge all taxpayers of the school district and the Commonwealth to contact their state legislators and urge them to take immediate action to prevent the massive increases in the PSERS contribution rate for school districts.