JACKSON TWP — The Rev. Reid Moon is in his first term as a member of the Seneca Valley School Board, but he’s been part of the budget process long enough to see that the time for pension reform is well past due.

The state pension system, commonly referred to as PSERS, or the Pennsylvania Public School Employees’ Retirement Act, dates back to 1917.

However, the recent Great Recession and financial belt-tightening have created a funding crisis in the pension system, a burden mostly shouldered by school districts in the form of tax increases.

Moon said that all the blame can’t be put on state legislators, but only they can fix a system that’s been broken for years.

“Every single year we have levied tax increases,” Moon said about his tenure on the school board. “All I know is that a big chunk of that is driven by this unresolved pension reform debacle.”

Lynn Burtner, the business manager at Seneca Valley, laid out just how the pension crisis affects school districts.

She said that the rate Seneca Valley is mandated to pay into the pension system fluctuates each year and is a formula calculated by the state.

For instance, Seneca Valley was mandated in the 2010-11 school year to pay a 5.64 percent rate into the pension system, which means the district paid $56.40 for every thousand dollars on payroll.

However, that rate has climbed every year and has since jumped to a 21.4 percent rate for the 2014-15 school year, meaning that Seneca Valley pays $214 into the system for every thousand it spends on payroll.

According to preliminary budget numbers released earlier this week, the school district is reserving $2.4 million for next school year just in pension costs.

And according to Burtner, that rate could climb as high as 32 percent for the 2020-21 school year, which means the district would pay $320 for every $1,000 in payroll.

Burtner said the annual rate is calculated by actuaries in a formula that is meant to predict future earnings, economic conditions, and other variables.

“As the demographics of the (retiree) group changes, so do the facts like interest earnings and estimated life spans,” Burtner said. “As the current picture changes, so does future estimates and rates.”

Burtner said the sharp increase in the annual rate can mostly be attributed to the economic collapse several years ago and the poor economic climate that has followed.

It wasn’t always like that. She said the PSERS system in 2001 was actually over funded because of the economic boom of the late 1990s.

“The economy and stock market was booming and everybody’s retirement funds went way up, but that wasn’t sustainable,” she said. “Unfortunately, I think a lot of people thought that bubble wouldn’t burst. And it did, in a big way.”

The business manager admitted that the pension fiasco is a complex issue that many people probably don’t fully understand. But that doesn’t mean it’s going to stop impacting their taxes.

Burtner said the school district is forced annually to raise property taxes just to handle the increased costs associated with pensions.

According to the current landscape, Burtner said a 2-mill tax increase would bring “a smidge over a million dollars” into the district, which isn’t even enough to cover Seneca Valley’s pension obligations in any year.

“These tax increases won’t even cover it,” she said. “Which is why we’re cutting everywhere else we can to be able to fund this pension obligation that we can’t control. It’s definitely frustrating.”

State Rep. Daryl Metcalfe, R-12th, said he’s supported legislation for pension reform and agrees something must be done about the problem.

He said there is about a $40 billion shortfall between the PSERS system and the SERS system, which is the state employees’ retirement system.

The inherent problem is that the PSERS system is solely a defined benefit plan, said Metcalfe, whose district includes Seneca Valley.

The distinction is important, he said, in that those in a defined contribution plan are often at the whims of an ever-fluctuating stock market that still hasn’t fully recovered from an economic collapse several years ago.

In comparison, a defined benefit plan is usually one where pensions are sorted out based on a unique formula that takes into account factors like salary history, years of service and final base pay.

Metcalfe said his preference is to eliminate the option for a defined benefit plan, if only for the fact that he’s allegedly seen foul play in the way they are administered.

“I’ve seen certain governmental entities make available to their employees a chance to gain a lot of overtime and spike their salaries in their last year of employment, which increases their pension payment,” he said.

Metcalfe said the Legislature has to “stop the sinking ship” before the financial landscape grows bleaker for school districts and taxpayers alike.

“There’s no easy fix to this problem that’s been growing for years, every year, even before my time here,” said Metcalfe, who was elected in 1999. “There have been changes that have fixed some but not all of the problems, and I’m in full agreement that we need to see some quick action on the issue.”

Unfortunately, according to Moon, the political atmosphere in Harrisburg might slow down the process. That’s because elections are in November, a fact that might stifle progress on reform.

“About a month ago I talked with Rep. Dick Stevenson, and he felt like with elections coming up, the only obstacle to pension reform going through is that they are unwilling to tackle this thing head on because of it,” Moon said.

For his part, Stevenson, R-8th, said he will fully support any sound plan that comes up for a vote.

“From my perspective the chances are good that some sort of action will take place on pensions this spring,” he said. “We’re certainly hopeful to accomplish something to relieve the pressure on school districts and to find a solution that addresses the issues of concern.”

Stevenson admitted that 2014 is going to be a “difficult budget year” for the state because “revenues haven’t grown as we would like them to.”

“But I plan to support any reasonable solution we can find here,” he said.

Regardless, Stevenson, who’s retiring at the end of this year, said the pension reform issue is “critical” and one that deserves the attention of every politician in Harrisburg.

“The growth in the pension obligation each year that we don’t find a solution is causing great concern for school system budgets as well as the commonwealth’s budget,” he said.