School districts facing hefty budget increases
It’s only December, but school districts are beginning to sweat like it’s the June budget deadline because they are already getting an idea of their financial situations.
Pennsylvania’s Public School Employees’ Retirement System has announced it has set the employer contribution rate — what the state, its school districts and their taxpayers must pay for the next budget year.
That rate, along with two other big ticket items, are causing significant increases for school budgets.
The 34.29 percent employer contribution rate passed by the PSERS trustees last week is a $200 million increase to schools statewide over last year’s contribution.
It’s a half percent lower than what Hollidaysburg Area Superintendent Bob Gildea said his business office was projecting.
“It is still a significant hit,” Gildea said. “When that rate is applied to our $21 million payroll, the total retirement costs are $7.4 million, but state reimburses us for half, so the cost to the district ends up at $3.7 million, which is a $165,000 increase from the current year.”
The pension contribution increase, combined with projected payroll and health care increases, expand expenses by $900,000 in the 2019-20 school year, Gildea said. He added that while costs increase, overall revenue from the state remains neutral.
Hollidaysburg Area plans to use savings from the sale of two buildings years ago to offset the pension increase.
It is still too early for many other districts to project the cost increase of pension, health care and payroll for next year.
Altoona Area plans a preliminary budget discussion during the school board’s the next Committee of the Whole meeting, scheduled for 6 p.m. Monday in the William P. Kimmel Board Room, district Community Relations Director Paula Foreman said.
Williamsburg Community School District is projecting an increase in the amount of $183,764, for pension, payroll and health care, Superintendent Lisa Murgas said.
“Williamsburg has committed the necessary funding from our fund balance for future PSERS costs,” Murgas stated in an email. “In addition to the committed balance for the PSERS costs, Williamsburg assigns a portion of the fund balance to cover any projected deficit in the following year. We have been very fortunate that we have not had to utilize either of these fund balances in the past to cover those costs. We are also very aware of where the budget is throughout the year and will make sure there is no unnecessary spending throughout the school year.”
The Public School Employees’ Retirement System is not only funded by employer contributions but also through investment earnings and mandatory member contributions.
PSERS members contribute between 5.25 percent and 10.30 percent of their pay depending on their membership class and when they joined PSERS. Members are expected to contribute an average of 7.59 percent, or about $1.1 billion in 2020.