Tag Archives: PSERS

Will Pensions Sink the Philadelphia School District?

by Christopher Paslay

Retirement costs in Philadelphia will increase fivefold in the next seven years, growing from $73 million in 2011 to $349 million by 2020. 

There’s a hole in the bucket, dear Liza, dear Liza,


There’s a hole in the bucket, dear Liza, 


There’s a hole.

These lyrics, from a traditional children’s folk song that I first heard as a child on Sesame Street, played through my head this week as I thought about the crisis facing the Philadelphia School District.

We have a hole.  A giant hole.  Not just in terms of cash, but also in terms of resources, staff, and services.  Earlier this year, the District laid-off nearly 3,800 workers.  As reported by the Notebook in June:

The 3,783 figure includes 676 teachers, 307 secretaries, 283 counselors, 127 assistant principals, 1,202 noontime aides, and 769 supportive services assistants, in addition to smaller numbers of workers in other categories. . . . The School Reform Commission adopted a “doomsday” budget . . . that provides a principal and a core group of classroom teachers for each school and nothing else. It has already said it will lay off all counselors, librarians, art and music teachers, secretaries, and support personnel, including noontime aides, in the schools.

Although about a third of the staff was rehired at the end of August, the fact that the District could do so little with so much money is concerning.

Consider these facts: The Philadelphia School District’s budget for the 2008-09 school year was approximately $2.7 billion.  The current budget for the 2013-14 school year is approximately $2.7 billion, although the district may still fall short $100 million plus, depending on the outcome of the negotiations between the School Reform Commission and the Philadelphia Federation of Teachers.

The question here is how was the District able to run at full strength with $2.7 billion just four short years ago, and be in such dire straights now?

The answer may very well rest with retirement costs, which continue to go up at an alarming rate.  According to the Pennsylvania Independent:

Payments to retired teachers and public employees are a growing threat to government budgets everywhere, and it is no different in Philadelphia. A new report from the Thomas Fordham Institute, a conservative education nonprofit, estimates the district’s total retirement costs will balloon from $73 million in 2011 to $349 million by 2020.

On a per-pupil basis, that works out to $900 per pupil in the district for 2011, growing to $2,300 per pupil by 2020.

Robert Costrell, a professor of economics at the University of Arkansas and an author of the report, says that trend is unsustainable.

“We’ve only just begun to see how bad it is going to be,” Costrell said Thursday.

The report examines the pension costs of the Philadelphia School District. Costrell said the financial mess unfolding in Pennsylvania’s largest city is on par with what has been seen recently in Detroit and Chicago. . . .

Because pension costs for public school employees are split between the local and state level in Pennsylvania, the situation in Philadelphia is partially a symptom of the $30 billion unfunded liability in the state’s Public School Employees Retirement System, or PSERS.

Because of that split, the state now picks up about $450 of that $900-per-pupil price tag, but as the costs rise, it will hurt both the district’s and the state’s bottom line.

And when the district spends about $15,000 per pupil — but will soon have to spend $2,000 per pupil on payments to retired district workers — that means fewer dollars are available to cover the actual costs of education.

Lawmakers in Harrisburg must solve the crisis because the state runs the pension system. Little progress has been made toward that goal.

Changes to the pension system approved in 2010 affected only future hires, which does little to affect the pension obligations in the short-term, the report notes.

Since most of the cost growth in the next decade is due to deferred payments of benefits owed to current workers or those who are already retired, changing benefit structure for new employees has little effect, Costrell said.

This news is indeed troubling.  As education advocates continue to fight for more funding for city schools—at both the state and local levels—the looming crisis involving pension funding hangs above it all.  State funds allocated by Gov. Corbett already make-up 50 percent of the Philadelphia School District’s budget—about $1.3 billion annually—and as pension obligations increase, this may very well cut into money earmarked for education.

Something has got to give, and sacrifices will need to be made.  Educators undoubtedly want the best for their students.  At the same time, after contributing 7.5  – 10.3 percent of every check to PSERS (Public School Employees Retirement System), they don’t want to see their pension funds go up in smoke.

Which leads to the following question: Will pension reform take place before the District goes bust?

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Pedro Ramos is not Scott Walker, and Pennsylvania is not Wisconsin

by Christopher Paslay

SRC Chairman Pedro Ramos may be emboldened by Scott Walker’s recent victory over Big Labor, but the Keystone State is a far cry from the Badger State.       

It appears that Philadelphia School Reform Commission chairman Pedro Ramos is suffering from Scott Walker Syndrome.  His recent attempt to push legislation that would extend the SRC’s power to nullify union contracts and unilaterally dictate salary and benefits to School District employees is curiously timed.  You’d almost think Ramos has become emboldened by Wisconsin governor Scott Walker’s Assembly Bill 11, also known as his “Budget Repair Bill,” which limits collective bargaining by public-sector unions, caps salary increases, and forces workers to pay more for their pensions and health benefits.

Members of the Philadelphia Democratic House delegation, however, do not seem to be as enamored by Scott Walker’s recent victory over Big Labor.  Walker may have survived Tuesday’s recall election, but this hasn’t inspired Pennsylvania state legislators to get on board with the SRC’s surprise legislative amendment that would further cripple School District unions and their bargaining power.

Although Pennsylvania’s Act 46 already strips the Philadelphia Federation of Teachers of their right to strike—giving the SRC the power to unilaterally impose contact terms and limit collective bargaining—Ramos feels he needs even more power.

According to Kristen Graham’s 6/8/12 Inquirer story:

State Rep. Michael H. O’Brien (D., Phila.), who was at the meeting, said Ramos admitted the SRC was attempting to sell a legislative amendment Ramos needed because current law “didn’t give the SRC enough juice,” in O’Brien’s words.

The SRC’s new ploy for more power was apparently an unpleasant surprise for many, including Mayor Nutter and members of the Philadelphia Democratic House delegation.

Someone, perhaps Nutter himself, needs to tell Pedro Ramos that he’s not Scott Walker.  And while he’s at it, he needs to explain to the SRC that Pennsylvania (and for the purposes of this argument, Philadelphia) is not Wisconsin.  For starters, Pennsylvania has a balanced budget (although the Philadelphia School District is still facing a deficit, but this deficit was created by the SRC itself).  Second, Pennsylvania’s Public School Employees’ Retirement System was just overhauled in 2010, cutting pension benefits and increasing member contributions.  Third, collective bargaining by the largest teachers’ union in the state—the Philadelphia Federation of Teachers—has already been severely limited for over a decade by the passing of Act 46.

Here’s a comparison between Pennsylvania and Wisconsin on three hot button issues: collective bargaining rights; retirement; and health insurance.

Collective Bargaining

Massive protests broke out in Wisconsin last year when Governor Scott Walker passed his Budget Repair Bill, which limited the collective bargaining power of public-sector unions.  According to the Greenbay Press Gazette:

The bill would make various changes to limit collective bargaining for most public employees to wages. Total wage increases could not exceed a cap based on the consumer price index (CPI) unless approved by referendum.

Contracts would be limited to one year and wages would be frozen until the new contract is settled. Collective bargaining units are required to take annual votes to maintain certification as a union.

Employers would be prohibited from collecting union dues and members of collective bargaining units would not be required to pay dues. These changes take effect upon the expiration of existing contracts.

But when you compare this to the restrictions imposed on the largest teachers union in Pennsylvania by the passing of Act 46 over a decade ago, it is relatively small potatoes.  According to an article in the University of Penn’s Journal of Labor and Employment Law:

The state takeover of Philadelphia city schools will obviously have an effect on Philadelphia teachers’ ability to bargain collectively for contract rights. . . . While the system is under the control of the SRC, teachers are prohibited from striking in order to secure contract rights. . . . For example, teachers could be faced with a significantly lengthened school year, less preparation time, and larger classes, all without the opportunity to bargain for any compensation for these impositions. . . . Also, the district would not be required to discuss “decisions related to reduction in force.” This allowance for the district, coupled with the fact that, under Act 86, the SRC may make decisions to suspend professional employees without regard to tenure protection has potentially dire consequences for the professional security of educators. In a situation involving layoffs, for instance, teachers who have years of experience could be suspended before new hires.

In effect, under Act 46, the SRC already has the power to unilaterally impose contract terms, overhaul traditional schools and turn them into charters, lengthen the school day and year without compensating workers, layoff teachers regardless of seniority or tenure, and takes away the union’s right to strike, among other things.

As for union dues: Philadelphia public school teachers can opt out of joining the union, but they are still required by the state to pay something called “Fair Share,” which basically means that they have to pay union dues anyway, which is about 1 percent of their salary.

Pensions and Retirement

Until Scott Walker passed his Budget Repair Bill, state, school district, and municipal employees in Wisconsin paid little to nothing for their pensions.  Now members of the Wisconsin Retirement System must contribute 50 percent of the annual pension payment, which means public school teachers have to start contributing about 5.8 percent of every check toward their pensions.

Since 2001, Philadelphia school teachers, who are members of Pennsylvania’s Public School Employees’ Retirement System, were required to pay 7.5 percent of every check to their pensions.  Legislation passed in 2010 now requires new teachers to pay 10.3 percent of every check toward their pensions if they want to receive the same pension as those hired before December of 2010; those new teachers who agree to accept a modified pension multiplier (smaller pension) can continue to pay at the 7.5 percent rate.

Health Insurance

Before the Walker bill, Wisconsin state employees paid about 6 percent of their health insurance costs.  Now they will be forced to kick in double that—about 12 percent of the average cost of annual premiums.

Philadelphia public school teachers have excellent benefits, and at little cost.  According to the current contract between the PFT and PSD, teachers have to contribute at most 3 – 5 percent of annual premiums, and many teachers pay nothing.  Co-pays do continue to go up, but teachers are in a good position here; it’s inevitable that in the future, sacrifices will have to be made, and employees may have to kick in more money.  This, of course, can be agreed upon at the bargaining table, and there is absolutely no need for new legislation to be proposed by the SRC to get this done.

The SRC’s recent attempt to push legislation to further cripple School District unions is uncalled for.  The SRC has already sent layoff notices to 2,700 service workers who are SEIU 32BJ union members, and is planning to privatize neighborhood schools and cut unions by turning 40 percent of District schools into charters by 2017.

Some can argue what Walker did in Wisconsin was justified; unions in the Badger State needed to be reeled-in to keep Wisconsin from falling off an economic cliff, which is why 30 percent of union workers voted in Tuesday’s recall election to keep Walker in office.  But the situation is a bit different in the Keystone State.

Pedro Ramos is no Scott Walker.  Shame on him for trying to use Walker’s momentum to push his misguided and unnecessary legislation to further cripple organized labor in Philadelphia.

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