Wednesday, November 21, 2012

Thanks to Pensions, Allentown School District Facing $40 Million Deficit

Allentown School Director Scott Armstrong, a conservative, never shies away from controversy. But liberal or conservative, we all need to pay attention to him when he rings the alarm about the pension crisis in the Allentown School District.

"What has happened to public education? Why has providing a basic education become so expensive? This is the question facing the Allentown School district as it moves toward the finalization of its budget for the next school year.

"Budget projections indicate in that five short years, with an annual 4% school property tax increase, the district will face a $40 million dollar deficit on a budget of approximately $275 million. What exactly is causing this becomes clear when one studies the numbers. While the district's operating and debt service expenses rise at a rate that roughly matches inflation, the cost of personnel skyrockets. Although a portion of this is due to the escalating costs of health care, the real culprit lies in the retirement benefits paid by the school district on behalf of its covered employees. The reason this increase is so great is because the retirement benefits are in the form of a defined benefit program.

"Defined benefit plans are the most expensive type of retirement program there is. The amount of the retirement benefit remains constant once the employee has retired and is based on payment options and the expected life of the employee at retirement. At one time the standard of pension plans, defined benefit plans are becoming obsolete because of the inherent high cost of the guaranteed payout.

"Much more common today are defined contribution plans. This is a once and done contribution and does not lock the employer in to guaranteeing income after retirement. The standard of the Public Schools Employee Retirement System is the defined benefit program. While this type of benefit is very rare in almost every other economic sector it remains the standard in the public school system? Why?

"Our state and local elected officials are clearly the guilty parties, as they have mandated these benefits not only for themselves but also for the teachers working in the Pennsylvania public school system. The current crisis, which results from their largesse, is a matter that must be dealt with quickly and directly. In the ASD, no reasonable amount of tax increases and staffing cuts can bridge the yawning gap between revenue and expenditures that the fixed pension benefit is imposing on the school district.

"Clearly the state needs to take action. The governor’s office and house and senate leaders need to provide legislative relief from the threat posed to the state’s public school system by defined benefit programs. In addition, public school employees need to become realistic about their expectations for retirement in the current financially challenged and tumultuous economic environment, which experts agree could last into the foreseeable future."

30 comments:

Anonymous said...

Mr. $15/hour guy:

It ain't Romney or Trump or Rush that is keeping you down. It's your public sector heroes what is doing you up the pooper.

They talk shit to you about the 1%ers, meanwhile they get a 180 day work year, all summer off and big breaks at every major holiday, good raises during the worst economies, and medical benefits and PENSIONS you'll never see no matter how much "fair share" you get them 1%ers to cough up. It ain't ever coming to you from the Great Redistributor, pal. It all goes to your troughfeeder guardians who will pat you on the head and tell you they are your only shot at happiness.

Meanwhile, you'll get nothing but maybe the short-lived satisfaction of sticking it to the man, who, in turn, will cut your salary or eliminate your job and still get his.

The point here is that a foolhardy wish of state and federal relief is just that. Until the general dumbass sees that the only thing he voted for is to have the money he might hope to earn siphoned off into the trough, you will see that deficit skyrocket past the Armstrong projection.

-Clem

Anonymous said...




According to the Pension code and Law, the solution is invest properly or Raise Taxes.

Anonymous said...

The reality is a pension by definition is a guaranteed amount paid in retirement. A defined contribution saving plan is not a pension. It is calling a duck a goose.

Corporate America have not changed pensions, they have ended them. Chanoing thre definition of a pension becaus eit suits your business model does not make it real.

You beleive that people who made a choice of careers and in many cases accepted low wages for years in anticipation of a pension in retirement must now abide by the globalization of Corporate America.

There are various ways to go about trying to reform pensions and even looking into COLA's on existing pensions but it is important that the ground rules start on an honest footing. No partisan tea party nonsense.

We are talking about ending pensions and replacing them with a mandatory contribution savings plan that may or may not be avialable for you in retirement. The idea that such an instrument is a pension was not the intent of these devicies when they were created and all the hyperbole and political chatter won't change that.

As to denying exisitng pensioners the promise of years of work for negotiated contracted pensions, will be fought in every court in the land. Stressing morality would appear to be lost on people who demonize pensions but what is not lost is, it is against the law and any changes would be illegal.

Be logical and honest and I beleive all parties may work it out. If the demonization continues probably not.

Phil

Anonymous said...

It is late, I just got in and am exhausted, please forgive the spelling errors.

Phil

Bill said...

I wish everyone could have defined pension plans, but that is about as far from reality as one can get. It is quite true that the Pension problem is choking budgets across the state. It is time for reform. Like most people, I do not have one and all of my retirement dollars come from the money I can save for myself.

Anonymous said...

40 million dollar deficit and the graduation rate is still terrible.

What exactly are we getting for our money?

Anonymous said...

This so called trumped up pension issue has been an issue since pensions were created. It cost money. Get over it. This is what society has to pay for its government to run. Taxes are comparatively lower today when adjusted for inflation and present value of money. This conservative ramble is getting tiring. People in Allentown have fine teachers that put up with crap that so called private sector people dont't have to. Teachers and public sector employees deserve their retirements that were promised to them when they signed up for the job!

Anonymous said...

Bernie
As Robert Smith how many city residents generally attend board meetings.

Anonymous said...

Anonymous said...

This so called trumped up pension issue has been an issue since pensions were created. It cost money. Get over it. This is what society has to pay for its government to run. Taxes are comparatively lower today when adjusted for inflation and present value of money. This conservative ramble is getting tiring. People in Allentown have fine teachers that put up with crap that so called private sector people dont't have to. Teachers and public sector employees deserve their retirements that were promised to them when they signed up for the job!

6:30 AM

If Allentown's "fine" teachers are putting up with clclc why don't they get new jobs?

Bernie O'Hare said...

6:33, I've never attended an ASD meeting and don't like to cover school boards, so I can't answer your question.

Jon Geeting said...

Scott and other board members could make things a little easier by making landowners in the NIZ pay more. Remember, the taxes that aren't going to fund development are property taxes.

The property tax is really a tax on two things - the land and the building that sits on the land. The city of Allentown taxes land at 5 times the rate for buildings. When they started doing this back in 1997, Pat Toomey says 75% of Allentown property owners got a tax cut. They shifted the tax burden onto people who own a lot of vacant land, or huge surface parking lots.

The ASD never followed suit, but they could do the same thing and give most school tax payers a tax cut while raising the same amount of money for the district.

In the future, raising the land tax would just push NIZ landowners to build new buildings sooner, and add more ratables to the school district's tax base. It's a good pro-growth way to address the pension crunch, and it would go a little easier on ASD taxpayers than the current millage spread. Just ask Pat Toomey!

Anonymous said...

Mr. Armstrong knows full well what is wrong with PSERS - at least I hope he does.

The fund was over funded shortly before the 911 attacks and the ensuing stock market crash. Harrisburg then decided they could not afford to match the employee contribution and allowed the districts themselves to forgo their contributions. All the while, employees have dutifully deposited their contribution week in and week out.

As always, it is state mismanagement and the fear of raising taxes to risk reelection.

Here's a good synopsis.
PSERS Crisis Explained

Anonymous said...

Mr. Armstrong is a school board member? Mr. Armstrong, what is your explanation for not paying ASD's contribution into PSERS for 9 years? Your employees paid in, you didn't, and now the bill is due. Don't act as if this is a new bill, this is a 9 year bill that you never paid. Don't lie to the people.

Anonymous said...

They shoot horses don't they?

Anonymous said...

The guy who was the main apologist and butt boy for the old deeply anti-participation and autocratic superintendent is the new appointment to Allentown City Council. Does not bode well for shattered democracy in the Queen City.
Un-freakin-real !

Anonymous said...

This legislation was first passed in 2001 under Tom Ridge, a Republican...The legisltors wanted more money so they gave crazy pensions to everyone..Yes, the state created the mess and needs to fix it..We'll see.

Anonymous said...

Politicians gave. Unions took. Everyone pretended it was sustainable.

The market can only be manipulated for so long before it eventually imposes discipline on those who refuse to impose it on themselves.

Eight separate school districts in one county is preposterous, as well.

Anonymous said...

Jon Geeting...Existing teacher contracts and their pensions must/will be honored. Moving forward real pension reform is needed.The private sector has dramatically reduced or eliminated pensions and encourages employees to take responsibility by investing in their 401 K plans. This due to our global economy to enable these companies to compete.The notion that teachers are above it all and taxpayers need to INVEST in education by supporting tax increases to fund their pensions is not with the times and is opposed by the majority of the working class in this country.
Our public education system is ranked 22 globally therefore all the incraesed spending on education proves that more spending does not equate to better results with our students. The highest expenditure for education are the teacher pensions. That is what needs to be reformed. Taxing NIZ landowners is shifting the burden to another group when the real reform needs to happen with the teacher pensions.TEACHERS NEED TO INVEST IN THEIR RETIREMENTS JUST LIKE EVERYBODY ELSE.

Upper Saucon Joe

Anonymous said...

My two cents worth:

1. Teachers are no longer underpaid. Many go to the very affordable state subsidized universities and make pretty good salaries with outstanding benefits, including the equivalent of 4 months off per year. Many teachers opt for ASD to get relief from their student loans and schools districts often pay for teachers graduate school. All in all, a very good deal; no need to top it off with over generous pensions. College grads would line up for these teachings jobs with a moderate, contribution based pension plan.

2. The teachers at ASD are generally outstanding and are not to blame for the poor academics at ASD.

Guy Williams said...

This is where Scott can do big things for his community.As a former union worker have realized for some time that the pension plans were too generous and would lead to financial problems for local governments.Not only teachers but first responders as well.Like the fiscal cliff we simply have to sit down and both sides have to give in to settle this mess.Scott has to lobby his state leaders" Republicans" to make the law changes necesary for reform.After all the rep rule state gov.On the other side state workers just gotta make a choice, do thet want their compensation in salary or benefits.Most like my self would choose a salary and contribute if i want to pension.Both sides on this issue need to do an ego check.Remember when Rendell first became mayor of a nearly bankrupt phila he dealt with the unions taking a big hit at first but in the end effectively saved the city from financial collapse.A little different situation now but this can be solved.

Bernie O'Hare said...

What Geeting is proposing is unconstitutional.

Anonymous said...

Again, the Rebublicans control state government in Pa..let them get off their asses and do something for once other than gerrymandering the districts so they never lose their jobs..Where's property tax reform? Where's pension reform? Where's any reform??The only thing they did so far is shift the cost of State government to the local school districts and municipalities. This forced everyone to raise their property taxes..Thanks Corbett..Thanks republicans..

Anonymous said...

Let's take our county's movement toward socialism to its final conclusion . . .

A defined benefit pension for EVERYONE!

Anonymous said...

Scott Armstrong and others need to acknowledge Pennsylvania Act 120 of 2010.

Anonymous said...

Some teachers are good and some are bad, but all love their summers off. Also, the union protects all of them. You can get a barnacle off a boat more easily that getting rid of a bad apple teacher.

Good for Scott Armstrong. Take on those union benefits, baby. Good luck!

Anonymous said...

Bernie, you NEED to go to ASD school board meetings. You might not like it, but the people need the oversight your presence brings.

Anonymous said...

This is the best explanation of the pension crisis that I have seen written. This guy is good. It is just another "fiscal cliff" that we will be going off very shortly. If you expect the same legislature that created this nightmare to correct it, get ready for some very troubling times.

JOHN
Hereford

Anonymous said...

Disagree, his essay says nothing new. How about some constructive solutions.

Anonymous said...

Are we all sure of the numbers and facts will the king and his head court jester holio¿ When holio is king he will fix everything his predicessor has done for his race. We all know the people the current king call the cancer of allentown!

Anonymous said...

To Guy Williams...

Funny you should bring up Rendell.He left the current Republican controlled House with 1.2 B deficit knowing the stimulus was going away so he could take care of other pieces of the state budget to make HIS administration look good. So what do Dems like Deely do....Lie out their teeth that Republicans are cutting education spending out of the budget. Dem State Rep Candidate Reynard fully admitted that Rendell pulled a fast one. Scum bags like Deely lied about educational funding to bolster their cause. The republicans balanced the budget under extraordinary pressure with Education getting their dollars restired. They should be commended....Fast Eddie is shrewd.
Regarding both sides coming to the table....The Dems will fight tooth and nail to keep the teacher pensions in tact because many of the campaaign dollars they receive come from the Unions ..particularly the PSEA.
90% of Deely's campaign money came from the Teachers union.
This is not a republican problem ..ITS A UNION PROBLEM !
Maybe taxpayers should come together and call out these Union thugs . They lobby that America should INVEST in education .Investing means raising taxes to pay for their benefits /pensions while American studenst rank 22 globally in math/science. This is Wisconsin all over again. Teachers and other public sector unions need to get with the times and invest in their own retirements.

Upper Saucon Joe