School retirement change could save schools $2.2 million
Fayette County’s six school districts and two vocational-technical schools will save a combined $2.2 million after the state legislature approved a change last week in the Public School Employees’ Retirement System. State lawmakers approved a bill that adjusts the schools’ contributions to the Public School Employees’ Retirement System (PSERS), making some accounting changes to cut the amount for the coming fiscal year from 5.64 percent down to 1.15 percent. That new figure is much closer to the 1.09- percent contribution of the current 2001-2002 year.
Frazier School District Superintendent Dr. Frederick Smeigh said this is a substantial reduction from what the school districts had expected to pay into the fund next year and everyone will save.
“This will save us (Frazier) well over $100,000. The state shares in 50 percent of the contributions. For every school district, that will also save the state,” Smeigh said.
Smeigh said the school districts would still have to pay for the raise legislators previously approved for the pensions but the increase will not come all at once.
The bill also raises the cost-of-living allowance for those who have already retired by more than $1.7 billion spread over 10 years. It was approved unanimously by the House and Senate on Wednesday.
Gov. Mark Schweiker plans to sign it into law, his spokesman said.
Lawmakers have sought a bill that would moderate rising pension costs to school districts while adding a one-time cost-of-living increase for 220,000 state and school retirees.
Many of those pensioners were upset at having been left out of pension improvements signed into law by former Gov. Tom Ridge last year.
That measure raised future pension benefits by 25 percent for active state workers and public school employees, and 50 percent for legislators.
The changes, plus major investment losses tied to the recession, have left the state and its 501 school districts obligated for about $470 million in new, shared costs to fund the Public School Employees’ Retirement System for fiscal 2002-03.
The initial 5.64 percent contribution rate or amount they must give to the PSERS system, compared to the 2001-2002 contribution of just 1.09 percent of payroll had school districts grappling with how they would cover the hefty raise.
The Fayette County schools are an example of this latest legislation’s effect.
The contributions the school districts originally expected to pay for 2002-2003 were $497,632, Albert Gallatin Area; $289,322, Brownsville Area; $737,895, Connellsville Area; $52,350, Fayette County Area Vo-Tech; $155,046, Frazier; $498,462, Laurel Highlands; $23,412, North Fayette Area Vo-Tech; $460,518, Uniontown Area.
The revised contribution is $101,468, Albert Gallatin Area; $58,993, Brownsville Area; $150,457, Connellsville Area; $10,674, Fayette County Area Vo-Tech; $31,614, Frazier; $101,637, Laurel Highlands; $4,774, North Fayette Area Vo-Tech; and $93,900, Uniontown Area.
The bill would create two tiers of employees who receive their pension increases based on the consumer price index. Those who retired on or before July 1, 1990, would begin receiving their increase on July 1.
Those who retired after that date would get their increase on July 1, 2003.
The bill would also establish a new minimum contribution rate, answering some concerns that school business officials have raised that their contribution rate was artificially low during good economic times, said Alan Berlin, an aide to Sen. Harold Mowery, R-Cumberland, who has helped develop the plan.
(Herald-Standard Writer M. Bradford Grabowski and Associated Press contributed to this report.)