Pennsylvania Pension Fund Raises Gains, But Calls on Taxpayers for Another Raise | News

PHILADELPHIA (TNS) – Investment markets injected $ 14.7 billion into Pennsylvania’s largest pension plan in the past fiscal year, a gain of 24.6% hailed as a record by senior executives at the school pension agency under siege, even though its earnings have lagged behind those of the stock market and many other public plans.

So will national and local taxpayers finally get a break, after injecting nearly $ 5 billion this year alone into the plan, known as PSERS, capping 17 consecutive years of increasingly costly support?

It would be no. The PSERS introduced the state with a further increase in the “employer contribution” rate split between school districts and the Harrisburg state government, costing taxpayers an additional $ 119 million, according to the agency estimate.

PSERS – the public school employee retirement system – now plans to collect a levy of $ 35.26 for every $ 100 paid to school staff next year. That’s an increase of about 1% from $ 34.94 last year, and the total is about double what the average state and local pension plan collects, according to data in the Database. Boston College Pension Plan Data.

(Most school staff pay an additional $ 7.50 per $ 100 of salary to the plan from their paychecks, or $ 8 per $ 100 if hired since 2011.)

In total dollars, the increase is about $ 119 million, based on today’s payroll. It will cost more if schools collectively add staff this year, as PSERS expects, and increase their salaries, as required by union employment contracts.

The more teachers are paid, the higher their pensions and the more PSERS collects from taxpayers to help fund them, under state law.

But why does the $ 73 billion plan need more millions this year, when it recently raised so many more billions?

External experts from Buck Consultants and senior PSERS executives who calculated the numbers spent part of Thursday morning explaining the intricacies of their calculation to board members gathered in Harrisburg and via remote video for an interview. two day meeting.

On the one hand, PSERS does not take all of its gains – or losses – in the year they occur. Under the current pension law, they are spread over 10 years. The idea is to “smooth out” gains and losses so that payments don’t change drastically from year to year and the state and school districts can budget more easily.

So only $ 1.47 billion of the year’s $ 14.7 billion gain will be credited to the plan for “contribution” purposes next year, a fraction of the $ 7 billion paid to retirees. (The calculation mixes this recent performance with fractional gains and losses from the previous nine years.)

On the bright side, the 2021 results are expected to reduce the need for PSERS for the next nine years, as they will be added to future calculations.

In addition, the PSERS voted this year to reduce its investment return target to 7% per annum, down from 7.25% previously, the latest in a series of cuts due to advisers’ uncertainty as to whether that investment markets can continue to rise as strongly as they have since the “Great Recession” of 2008-2009.

By predicting lower returns, PSERS claims they are forced to charge more because they assume they will make less money by investing and need more elsewhere.

The rate has also risen more than it would have because more active teachers retired or resigned last year, slowing the growth of the school payroll on which contributions are based, a said Brian Carl, Chief Financial Officer of PSERS.

PSERS predicts that the contributions it collects from employers will continue to increase, at a slower rate, until around 2035. By then, the plan hopes to have accumulated enough investment assets that it can start charging less each year, instead of more.

{p class = “krtText”} Despite these daunting finances, some administrators have said they would like to see PSERS increase the pensions it pays.

{p class = “krtText”} Chris Santa Maria, the Harriton High School teacher and former union president who heads the PSERS board, said he would particularly like to see an increase for more staff. elderly who retired before pensions were increased by the state in 2001. They have not had a pension increase since fiscal 2003 and are particularly vulnerable to rising inflation, said Santa Maria.

{p class = “krtText”} Republicans on the board have warned that lawmakers are unlikely to do so for the plan, which already faces a deficit of more than $ 40 billion in liabilities on assets to pay them off, even after the 2021 windfall.

{p class = “krtText”} “I’m not sure there would be an appetite to make legislative changes now,” said Stacey Connors, an assistant to the trustee, Senator Patrick M. Browne (R., Lehigh ), who represents the senator during his frequent absences from council meetings.

{p class = “krtText”} But her colleague Sue Lemmo, a Curwensville art teacher and union leader, said she was concerned that lower retirement guarantees for recent hires passed since 2010 could push teachers to average age to leave the profession and frightens university graduates.

{p class = “krtText”} “This is why you teach,” she said, “because at the end of your career you will have this pension.” She predicted a “mass exodus” as more and more realize that pensions guaranteed for recent hires will not be enough to fund their planned retirements.

{p class = “krtText”} © 2021 The Philadelphia Inquirer

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Dolores W. Simon