The School District is facing a potentially serious budget problem in about 3 years. This problem alone could cause our property tax rates to increase by 10% in 2012 or 2013.
This budget problem is caused by a shortfall in the Pennsylvania School Employee's Retirement System (PSERS) which will occur due to the investment losses in the system over the past few years, increased benefits that the State granted a few years ago, and an anticipated increase in retirements.
The School District pays PSERS a percentage of all the employee salaries to cover the retirement costs of our school employees. Currently, PSERS' rate is approximately 5%. However, in school year 2012/2013 the rate PSERS will charge will increase to approximately 26%, based on their projections for the retirement fund. That represents an increase in retirement contributions of more than $8,000,000 for our School District which would require an increase in property taxes of approximately 10%.
The School Board began to put some money away last year in their own "Stabilization Fund" by slightly increasing the percentage paid into the fund beyond the PSERS rate. This will result in softening the blow of the large increase in 2012/2013, however, it will only delay the huge tax increase by a year or so.
While we applaud the efforts of the Board to do some advance planning, the bottom line is that this problem is a huge one which will only further exacerbate the skyrocketing personnel costs of our School District. The large salary increases granted by the School Board for the next 4 years in the last Teachers Union contract also contributes significantly to this escalating retirement funding problem which will add significantly to the cost of a Great Valley School District education.
At the last School Board Finance Committee meeting, several members of the public encouraged the School Board to take more action now to reduce the costs of the School District in anticipation of this very large problem.
We can not just wait until 2012 or 2013 to address this problem. The public can not be expected to pay a 10% increase in property taxes to fund these astronomical personnel costs.
The Business Manager, Chuck Linderman, did suggest that the Board start a Community Advisory Group for Finance to meet with Linderman and the Board to discuss the District's finances and to make suggestions. We think this is a very good idea, but we also believe the Board must make an effort now to take additional steps to address the potential budget problems in 2012.
The Board was also encouraged to post the information regarding the PSERS problem on their website in order to better educate the public. They have not placed it in a prominent location, but the information was posted in the meeting agenda for the Finance Committee meeting on August 24, 2009.
You can read further about this problem in a previous article on our website which is titled "Pensions mean more Taxes??" which is located just below this article.
Sept. 2009
