Quaker Valley School District could contribute about $6.6 million to the Public School Employees' Retirement System in next year's budget, school leaders said.
That's about a $5.8 million increase since the 2008-09 year when Quaker Valley contributed about $813,000.
The district, like many schools across Pennsylvania, has prepared for the PSERS' vote to raise school districts' pension contributions from 30.3 percent to 32.57 percent, beginning on July 1.
“It is obviously an issue that has been talked about at the state level for a long time, and we've anticipated how it would affect Quaker Valley,” said Scott Antoline, Quaker Valley's director of finance and operations. “There have been significant increases in the contribution rate for all the school districts for the last 10 years or so. Increases are projected for the next couple of years at a lower trend rate until they flatten off in about four or five years.”
The contribution will continue to climb gradually over the next few years until the rate reaches 36.4 percent in 2021-22.
In 2010, Act 120 was passed to step up the rate needed to address the funding issue with the pension accounts. Because school districts operate as a defined benefit pension plan, PSERS prefunds a member's retirement over the life of their career.
According to PSERS press secretary Evelyn Williams, the system has been underfunded for the past 15 years. The debt for the system is currently $42.7 billion.
“In this timeframe, there were two huge economic downturns,” Williams said. “The recessionary times definitely contributed to the debt. You also had benefit enhancement back in 2001 when the legislature increased the pension multiplier. There was cost of living adjustment for retirees in 2003. All of those things kind of compiled together and added to the debt.”
Factors such as salary increases and the number of people using pensions can determine the contribution rate.
Williams said this year is the first time in 15 years the rate is set for the commonwealth and school employees at the actuarially required amount.
“It's necessary to pay down the debt that has been earned,” she said. “It's very difficult for them to note that. But there is some progress being made.
“In two years, we do expect our funded ratios trend to swing back from bottoming out and start to increase as we're getting more of this funding into the system.”
Because of this issue, school districts throughout Pennsylvania could see an increase in property taxes. Quaker Valley would be no exception.
“All expenditure increases are related to property tax assessments and the balancing of the entire budget,” Antoline said. “There is definitely a budgetary impact to that. As we put together all the revenue sources and expenditure outlays, it is definitely in that formula that drives what may be needed from a local contribution.
Districts are required to pass a budget by June 30.
“Typically, Quaker Valley has been cost of living index or less for quite some time. We've had a strong success rate of being able to do that and maintain things. We have plans in our fund balance to absorb some of these spikes that are occurring with the pension contributions, and, kind of, blend that out over time for the taxpayers of the district.”
Matthew Peaslee is a Tribune-Review contributing writer.
Editor's note: An editing error incorrectly listed the debt for PSERS. It is $42.7 billion.
