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State pension crisis: Harrisburg failures, stark figures and no plan

Butler School District taxpayers were shown stark numbers last month reflecting the seriousness of the state pension crisis. District taxpayers were responsible for $131 million — their share of the shortfall in pension funding for public school teachers.

New accounting rules require each of the state’s school districts to report its share of the underfunded teachers’ pension obligation. The pension obligations continue grow despite districts making significant annual payments. Butler paid $8.9 million in pension costs for the 2014-15 school year.

For Seneca Valley, the local share of the underfunded state pension is $142 million. Seneca paid $9.9 million for the 2014-15 school year.

Smaller districts have smaller pension liabilities, with Karns City at $29.6 million and at South Butler $43.2 million.

For large and small districts, the pension obligations might as well be $1 billion. The districts and their taxpayers don’t have the ability to pay those sums.

After more than a dozen years of underfunding by the state, approved by lawmakers and governors from both parties, the unfunded balance has grown to more than $50 billion. The accounting change requiring local school districts to post their proportional share is making the pension crisis more real and its being talked about at school board meetings.

Since the early 2000s, Harrisburg has failed to make full payments for the state’s share of the pension funds, and that shifted a greater burden for education to local taxpayers.

And that shift by Harrisburg to local taxpayers is making worse a situation that already was out of step with other states. The average for states’ contributions to public education spending is 45 percent. In Pennsylvania, that figure is 36 percent. Weak support from Harrisburg means that local taxpayers pay 54 percent of public education costs. In most other states, local taxpayers fund about 44 percent.

There are arguments over where Pennsylvania stands in terms of total education spending. Gov. Tom Wolf claims Pennsylvania ranks 49th in per-pupil spending, while other groups claim the state ranks 10th in total spending on public education. The ranking depends on whether total spending is considered or only state spending.

If Harrisburg were to move closer to the national average, it would require additional state revenue, meaning higher taxes, meaning either higher sales taxes or higher income taxes. Gov. Wolf has proposed a natural gas extraction tax to raise the needed funds.

Understanding the roots of the pension and public education funding crises does not solve the problem. But at least taxpayers are learning the facts.

And when it comes to facts, taxpayers should be reminded that a part of the pension crisis is tied to state lawmakers voting themselves a 50 pension increase in 2001. Soon after lawmakers passed their own 50 percent pension raise, unions for state workers and public school teachers complained — so state lawmakers passed a 25 percent pension increase for those groups.

Thanks the dot.com stock market bubble in the early 2000s the pensions had investment values that exceeded pension liabilities, so state lawmakers promised that their pension grab “would not cost taxpayers a dime.” But soon after the pension grab votes, the stock market crashed — and now those votes for big boosts to state pension benefits is responsible for 10 billion or more of the current $50 billion shortfall.

Harrisburg continues to put off real pension reform. Past actions, wrongly labeled as reform, were mostly accounting tricks and delaying actions to put off the days of reckoning.

Part of any pension reform should require those benefiting from the 2001 pension grab to increase contributions to cover the additional benefits. Beyond that, there should be shared pain including taxpayers and future pension beneficiaries.

The new accounting rules are shining a bright light on the real and growing costs of Harrisburg’s failures to deal with pension crises honestly. It can’t be put off any longer.

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