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School district contributions to the teacher pension fund continue to soar.
But there was a small bit of good news when a state agency responsible for setting the rates announced next year’s numbers: Contributions are still going up, but less than projected.
The impact likely will be small. Take Dallas School District, where Business Manager Grant Palfey is already crunching numbers for the 2018-19 fiscal year. The payment rate — a percentage of teacher payroll — was supposed to climb from 31.74 percent to 33.43 percent, but will rise only to 32.6 percent.
“That saves us about $59,000,” Palfey said. It’s not enough to change the math that has locked the school board and teachers union in protracted, often-bitter contract negotiations — the district insists it cannot afford what the union has asked for — but it is enough to avoid furloughing one teacher if money gets tight, or to shrink any potential tax hike.
Of course, the announcement “saves” money the way a shopper saves by unexpectedly finding a needed product on sale. Overall, the payment rate is still climbing — something that has happened almost every year since the 2001-02 school year.
Back then the pension fund was flush with cash, and the “employer contribution” rate — split between school districts and the state — was 0 percent. Legislators were so confident the fund was stable they passed a law increasing the maximum pension to 100 percent of pay — right before a recession hit and the fund started losing money on investments. The law has since been revised.
As the losses mounted, the agency that handles the fund, the Public School Employees’ Retirement System (PSERS), started jacking up the contribution rate — slowly at first, rising to 8 percent in the 2011-12 school year, but then more quickly, breaking 20 percent in 2014-15 and topping 30 percent this year.
By comparison, the “employee contribution” deducted from teacher pay has remained relatively constant. It varies from 5.25 percent to 10.3 percent depending on when they joined PSERS and what class of employee they are under the system. Employees are expected to pay an average of 7.57 percent of salary in 2018-19.
The pension shortfall called for quicker increases earlier, but Harrisburg initially tried to ease the fiscal pain by limiting hikes — or as a media release announcing next year’s contribution rate put it, “in the past, various pieces of pension legislation suppressed the employer contributions”
The release also notes the rate set for 2018-19 will mark the third consecutive year that contributions have matched the “actuarially required rate” needed to pay down the pension fund debt, and that 2016-17 “was the first time in 15 years that the actuarially-required rate was paid” by districts and the state.
The reduction in the payment rate resulted from better-than-expected returns on fund investments. The projected increases were made assuming investments earned 7.25 percent in returns. This past year, the investments yielded a return of 10.14 percent.