Philly teacher: 'Why the outrage about our pensions?'

A Philadelphia public-school math teacher writes re my Sunday column:

"I was happy to see that our pension fund did well last year. What I don't understand is the outrage about our pensions.

"I have 7.5% taken out of my salary every check; I have no say in that at all... I contribute my share, while the district doesn't always contribute its share. Why is the general public always writing nasty letters to the paper about the teachers' pensions?

"My husband worked for [a large Philadelphia-area employer] for 35 years, never contributed a cent and yet was entitled to a pension...

"I realize that company pensions are going the way of the dinosaurs. But why are people so angry that teachers, who contributed and who worked hard for many decades, sometimes in less than decent conditions, get a pension?.... [They say] we only work 7 hours a day, 10 months a year. They should see the other work, done on my computer and at my kitchen table, on weeknights and weekends."

She asked that I not post her name.

My reply: Thanks for writing. I appreciate your question. Here's why your 7.5% wasn't enough:

Take a look at PSERS' annual Overview of the Investment Portfolio at www.psers.pa.gov, and the Summary Statatements of Changes on Page 5. (This is revised from the original note, which directed the reader to six-month instead of full-year numbers.)

The "Pension Benefits" line shows how much Pennsylvania school pensioners collected during the schools' fiscal year 2016 -- $6.3 billion.

"Member Contributions" shows what school workers paid toward pensions with their 7.5 percent paycheck deductions -- $989 million. That covered less than one-sixth the cost of last year's pensions.

Where does PSERS get the rest of its money?

There's the "Net Investment Income" from the $50 billion PSERS invests. This varies, a lot. In school year 2016, investments yielded just $473 million

And there's PSERS' main source of income -- "Employer Contributions" -- from state taxpayers and local school property taxes. Those totalled $3.2 billion.

Add it all up, and PSERS paid pensioners more than $6 billion, while bringing in less than $5 billion.

Of course, investment results are variable. PSERS had a weak 2015, losing money during the calendar year. Investments recovered sharply as stocks and commodities rebounded last fall, bringing in $2 billion that's not counted with fiscal 2016 numbers. But the system's assets are still far below its long-term obligations. 

And taxpayer-funded "Employer Contributions" are still projected to rise -- to nearly $4 billion this year, and $4.4 billion next year.

Very few other items in the Pennsylvania state budget are as large, or growing as fast, as school (PSERS) and state worker (SERS) pensions have grown in recent years.

PSERS has 257,000 "active members" paying in and 225,000 retirees collecting checks. While the school-age population has fallen, the number of school retirees keep growing, as people live longer in retirement. At this rate, in not too many more years there will be as many retirees getting paid, as teachers paying in.  

How much is your pension, compared to your former pay? It's less if you didn't spend your career as a teacher. But many long-serving school employees -- including most of the teachers currently vested -- can be eligible to collect as much as their former pay.  

Add in Social Security, and school employees can make more when they're retired, than when they were working. Including the smaller group of administrators and senior teachers who retire in some suburban districts at over $100,000. 

How many retirees from private companies that you know will get retirement pay equal to what they made when they were working?

Your husband's company has frozen its pension plans for younger workers, and is now giving them, not a guaranteed pension like he has, or like you and other school employees have, but a 401(k) plan, where the value can rise or fall with the investment markets, the size of your check isn't guaranteed, and the company never has to put another dollar in, besides the match they make while a person is working.

That's why some of our readers end up resenting the public-sector pensions: they feel they are paying more every year in taxes for your plan, which pays a lot more in retirement, than theirs does. 

Of course it would be great if Pennsylvania or the U.S.A. found a way to give all hard-working people the kind of pensions your school employee union and elected officials agreed to.  

But it's not too clear how many private employers could afford pensions like that, and it's not the kind of pension program supported by the legislators we have been electing in recent years.

— Joseph N. DiStefano

Our math teacher writes back:

"Thank you so much for replying and for taking the time to point out things that I've overlooked.

"My weekend and last night were spent creating tests, which I will then have to mark this week... As a math teacher I am always curious about figures and finance. I plan to go over the PSERS annual report when I actually get a bit of time to concentrate.

"My first thought is that the change in multiplier [credits for year served] in PSERS pensions that was enacted [after 2001] was a big mistake. The multiplier went from 2% to 2.5 %, which drastically changed the amount of pension money going out... A person who worked 40 years and took no survivor's benefits could be paid 100% of his salary (average of the highest three of the last five years).

"The amount of the pension would also be dependent on the school district where the teacher worked. Lower Merion and Council Rock are among the highest paying districts. Philadelphia is among the lowest of the districts. Some districts have a pay structure that takes 20-30 years to reach maximum salary; Philadelphia only takes ten years.

"Our older son work in a jobs where he has a pension, 401k plan, and bonuses. Our younger son, on the other hand, [has only] a 401k. He has been putting [additional retirement] money in Roth IRAs...

"All hard working people deserve pensions. I am just tired of being vilified by the public for being a teacher...

"I would love to have someone come into my classroom and teach 30 students, using a blackboard that was installed before WWII. And I am blessed to be in a good school, where I don't have to fear for my safety, as I did earlier in my career."