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April 23, 2013

Pa. teachers may take big pension hit

— The average teacher stands to lose more in reduced pension benefits than the average retiree gets in a year of Social Security payments.

The Pennsylvania State Education Association estimates that under Gov. Tom Corbett’s plan, the average teacher would see $16,166 less in retirement benefits.

The average Social Security benefit in 2013 will be $15,132.

The union calculated that Corbett’s reforms would translate into a 26 percent decrease in benefits. That means, the average teacher now gets about $60,000 a year in retirement payments – more than the median household income of $51,000 a year in Pennsylvania.

The union’s estimate for the average teacher benefit also is double the average yearly benefit paid to existing retirees in the two main public sector pension unions.

The Public School Employee Retirement System estimates that the average yearly benefit for its members was $24,122 in 2012, spokeswoman Evelyn Tavitski said. The pension system includes all public school employees – including janitors, administrative staff, cafeteria workers and aides, she said.

The average paid to retirees in the State Employee Retirement System is $25,083, SERS spokeswoman Pamela Hile said. The SERS system covers all state employees who do not work in public schools.

David Broderic, a spokesman for the teachers union, said that averages for existing retirees are dragged down because many retirees left the workforce years ago. Long-retired seniors have smaller benefit payments because their careers ended when pay was lower. In public pensions, retirement benefits are calculated using a formula that includes the average pay for the final three years of the worker’s career.

A Corbett administration spokesman said that in most cases, an employee's pension is not expected to provide all of the savings for an individual’s retirement. A pension is expected to be part of a “three-legged stool” of retirement benefits – along with Social Security and the retirees’ personal savings, said Jay Pagni, a spokesman in the Corbett Administration’s budget office.

But Broderic said that the administration is seeking to renege on an obligation.

Teachers and other government employees contribute 7.5 percent of their pay toward their pensions.

The governor predicted last fall that pension reform would be one of the big issues in 2013.

Last week, the House state government committee held a public hearing on the matter, one of the first steps in the legislature toward confronting the problem. The state is faced with $41 billion in unfunded liability costs. Both the state and local school districts are scrambling to determine how to absorb their costs tied to that unfunded liability.

“The cost of doing nothing is substantial. If the current projections of the (employer contribution rates) do not change, we will be devoting about $2,500 per student in combined local and state resources just to pension costs,” Jay Himes, executive director of the Pennsylvania Association of School Business Officials, said in testimony to the House committee.

PASBO endorsed a plan to reduce the multiplier used to calculate pension benefits. Many veteran school employees now have a 2.5 percent multiplier baked into their benefit formula. Newer hires have a 2 percent multiplier. The administrators’ organization suggested using the 2 percent multiplier for all employees.

The group said that while there are questions about the legality of making changes to pension benefits for existing employees, there are legal decisions that suggest judges would not reject them.

The administrators’ group opposed many of the key features of Corbett’s pension reform plan.

PASBO – which represents school administrators – opposed any reform that would cap the salary amount that can be used to calculate benefits.

The group also has opposed a proposal that would allow all the state and school districts to postpone making employer contributions.

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