Their View: Harrisburg needs to own pension mistakes

Dear Gov. Wolf,

Thank you for a bold budget proposal. Your breathtaking suite of reforms promises fairness for Pennsylvania. What is inherently unfair, however, is passing the cost of Harrisburg’s risky decisions about the Pennsylvania School Employees’ Retirement System to school districts and property owners. We’re only seeing the tip of the iceberg; responsible actuarial analysis puts PSERS total unfunded liability in the neighborhood of $60 billion, or $12,000 per household.

I’ll take you at your word: You’re serious about improving public school funding, and you welcome new ideas. The same goes for the General Assembly: They’re serious about pension reform.

If so, then allow me to share some alternative thinking about pension funding. We teach our kids to take responsibility for their mistakes. Harrisburg’s pension funding mistakes are born from a bipartisan attitude that kicking the can down the road is better than honesty, pragmatism and action.

Consequently, legislatures and governors before your tenure broke Pennsylvania’s pension systems. As a businessman, you know the common storefront sign: “If you break it, you own it.” Since Harrisburg legislated the unfunded liability, why not own your mistakes by assuming all of the state pension systems’ employer costs that exceed the annual premium, or “normal cost?” That would lower school district pension contributions to about 8 percent of payroll, not the 30 percent of payroll we can look forward to during your term. You could repair a lot of the damage by using your state coffers instead of our school district budgets to pay the debt that Harrisburg created.

Without the ever present worry of increasing pension contributions, school districts could use their savings to address educational needs and reduce property taxes. Every district would benefit. Reducing PSERS contributions to the normal cost would free up $2.6 million in next year’s State College Area School District budget. That’s worth more than double the increase in basic education funding you’ve proposed for our district, or half the debt service for the State High reconstruction that begins in June. Either way, for a community that has seen school property taxes increase for 19 of the past 20 years, some relief would be welcome.

A “government that works” needs to pay its bills. It won’t be easy when pension funding was neglected for more than a decade. The $150 million in savings you anticipate from your GO TIME program won’t be enough to meet a $1.2 billion PSERS payment that will double during your term. More than likely, neither will the revenue from a gas severance tax. I’m forced to conclude that your pension payments will require even more revenue. Your proposals to increase the state income and sales taxes, while distasteful, are safer bets to meet your pension obligations than speculating on prohibited bonds. After all, we’re serious about this, right?

When your pension payments are sufficient, then use what remains to ensure that educational funding is adequate where you have evidence that it’s not. You set an ambitious goal to provide 50 percent of public education funding from the commonwealth. Representing a school district that receives 15 percent of its revenue from the commonwealth, and whose state funding per student ranks 484 out of 500 — less than half of the state median — your proposal is music to my ears.

Funding education through a combination of increased sales and income taxes certainly isn’t a new idea; it’s pretty close to what House Majority Leader Dave Reed proposed in HB 2425 last session. That bill stalled in committee.

So, based on past performance, I am skeptical that Harrisburg has the wherewithal to meet a 50 percent funding commitment for all school districts. Nevertheless, your “can do” attitude is refreshing. Perhaps it will infect the General Assembly.

In summary, if you want to reinvent government, money is not the answer. Money is an expectation that preceded every governor before you, and will probably succeed ever governor after you. What school districts need now is stability. You and your partners in the General Assembly can help us by eliminating the risks that you foist on school districts through pension reamortization and bonding schemes, unrealistic assumptions and unfunded mandates. Own your mistakes and deflect the consequences of poor legislating away from school districts. Pay the overpromised, underfunded pension bill that Harrisburg created. By doing so, you’ll free up local revenue for school boards to address equally thorny issues like educational need and property tax reform ... issues that are best addressed in our communities.

You have a very large pension debt to pay, and school boards have districts to govern. If you do your part, then we can do ours.