Pennsylvania school employees pension costs to quadruple in 4 years

The Pennsylvania Public School Employees Retirement System (PSERS) at their meeting today certified a small increase in the employers’ (re: taxpayers) contribution rate – from the current 4.76% to 4.78% of payroll effective July 1, 2009. This represents about a $22 million increase in employer contributions. They also updated the projections of the pension plateau beginning in 2012-13 – from the prior estimate of 11.23% of payroll to a projected employers rate of 16.40% of payroll (see story in the Patriot News).

Th estimated FY 2012-13 employer contribution of about $2.3 billion annually is almost four times the current level ($595 million). These contributions are split between the state and the school districts, meaning there will be a great deal of pressure to increase both state taxes and local property taxes. The complete spreadsheet of future contributions is here.

These numbers are based on the returns through June 2008 – the more recent market losses are not yet reflected. Therefore, it is likely these projections will be revised upwards. This means unless the fund returns 8.5% or more this year (July 2008-June 2009), the projected payments in 2012 and beyond will rise.

For some policy alternatives, check out Rick Dreyfuss’s commentary on getting out of the pension dilemma.