From private sector, perspective on pensions

Raeann Hofkin knows what it takes to meet a payroll. She wishes Pennsylvania did, too.

Hofkin has worked as payroll manager at a string of Pennsylvania employers (currently Mobilex USA). On Thursday, John Gehman, president of the Upper Perkiomen school board, invited Hofkin, vice president of the unpaid, nine-member board, to recount for its members the history of why local taxpayers are having to pay so much more each year to fund the state Public School Employees' Retirement System, and to suggest what to do about it.

The district's PSERS payment quadrupled from 2009 to 2014, to $3.8 million, Gehman said. "Not sustainable."

Hofkin offered a reminder of what veteran school employees collect: repayment, on retirement, of all their past contributions to the plan, with interest; plus 75 percent of their peak salaries; plus Social Security. "I've never seen a more luxurious plan" in 30 years in the private sector, Hofkin said.

PSERS also invests. But despite dispensing more than half a billion dollars in fees to private investment managers last year, profits don't come close to meeting the need. State and local taxpayers guarantee the rest.

Back in 2001, legislators boosted their own pensions while also cutting pension funding, Hofkin said. Finally, in the late 2000s, the legislature ordered towns to pay progressively larger "contributions" each year. From zero, school districts now pay $1 million to PSERS for every $4 million paid to school workers. The rate is scheduled to increase, then plateau after 2020.

"How much of our school budget are we willing to pay before we draw a line in the sand?" Hofkin asked.

She urged the board to adopt a resolution similar to the proposal the Quakertown Area school board passed earlier this year, allowing the district to delay its quarterly pension payment - due next month - until the legislature passes a law to contain pension costs.

School districts in Berks and Carbon Counties have passed more limited resolutions urging pension reform.

The movement comes amid the budget impasse in which Gov. Wolf and the General Assembly have been unable to agree to a common spending and tax plan. Pensions are a big part of the fight, according to Alan Schankel, head of municipal bonds at Janney Capital Markets in Philadelphia.

Wolf wants to borrow $3 billion to help towns reduce school pension payments. Republicans prefer to shift public employees, including school workers, toward a private-sector-style, 401(k)-type retirement plan in which taxpayers are no longer on the hook when workers' investments don't meet return targets.

"PSERS is not too big to fail," Hofkin warned. She cited examples of the Detroit and Bethlehem Steel pensions, which were reduced in bankruptcy proceedings.

By joining Quakertown in stalling PSERS payments, Upper Perkiomen and other school systems would increase pressure on legislators to finally stabilize the pensions and reduce future payments, she said. "I'm trying to save the retirement plan, before it goes belly up."

Despite Gehman's backing, Hofkin could muster only four votes to adopt a Quakertown-style resolution at the meeting Thursday. Of the five members who voted to delay a decision, some urged solicitor Ken Roos to draft another, milder resolution urging legislators do more.

One board member, Bill Scott, said pompously that he would vote against any resolution that didn't also solve the budget, charter school funding, and other problems in a single vast proposal.

The board listened closely to Roos, who recounted the official position of the Pennsylvania Association of School Boards (PASB): that an outright resolution to stop funding PSERS could violate their oaths as elected officials to obey state law, leaving them vulnerable to citizen complaints and being forced out of office.

Pennsylvania school texts may praise the Founding Fathers and the women's suffrage and civil rights marchers who violated the laws of their times. But the idea of breaking any law was a lot, the Upper Perk school directors said. Didn't they swear on Bibles to follow the law? Aren't they examples for the schoolchildren?

The budget impasse suggests another way. PASB lawyer Stuart Knade told me that districts might delay PSERS contributions without oath- or law-breaking if the state budget impasse ends up delaying state school budget subsidies beyond their September deadline.

Not that he's recommending it. But it is an option.

Hofkin and her allies will try again at their board's September meeting.


JoeD@phillynews.com

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