One of the major influencing factors in the development of the SSD budget is the impact of PSERS (Pennsylvania School Employees Retirement System). A major concern for school districts state-wide is the impact that PSERS will have on the budget, both next year and in the years ahead. Specific to that concern is the dramatic increase in the mandated employer contribution rate which is forecasted to jump from 4.78% this year to 8.22% in 2010-2011, and then up to almost 30% by 2013.
PSERS is a governmental, mandatory defined benefit pension plan for Pennsylvania school employees. Established in 1917, it is one of the oldest public pension plans in the United States and currently serves more than 547,000 members state-wide. PSERS is funded by three sources: employee contributions, employer contributions, and investment earnings. The largest funding source – by far at 65% – has been investment earnings. As in many other areas of the economy, dramatic declines in investment income are affecting PSERS funding. PSERS’ funded status as of June 30, 2009, was 79.2%, down from 86.0% the previous year. In layman’s terms, that means that PSERS currently holds only 79 cents for every dollar it needs to pay in retirement benefits. The remaining balance is accumulated as debt. In order to minimize that debt, substantial increases in the mandated employer contribution rate are forecasted in the coming years. Those increases directly impact school district budgets.
There are a number of options currently on the table for legislative discussion (as PSERS is a state regulated pension system). The PSERS Board serves as a resource for information to communities and to legislators. Visit the PSERS web site to learn more. Also click the links below for documents and information presented at School Board meetings.