Teacher pensions may trump curbs on tax increases

Area school district business managers estimate that if nothing changes with the state retirement system, projected rate spikes would be the equivalent of 20 to 25 mills.
And school boards may not need voter approval to raise taxes that high.
State law says that school boards can raise property taxes up to an annual rate, and if they want to go above that rate, they must get voter approval.
However, there are 10 exceptions to that law. One of those exceptions is retirement contributions.
“PDE strictly follows the law of the exceptions,” spokesman Leah Harris said, referring to the list on the department’s website.
If the anticipated increase in a school district’s share of payments to the Public School Employees’ Retirement System is greater than the school district’s index, the school district will be eligible for an exception equal to the portion of the payment increase that exceeds its index, according to documents on the PDE website.
The index rates are based on a state formula, but they are not the same in every school district. Typically, they have been between 3 and 4.5 percent.
That is less than school districts would need to pay for projected pension costs, which are estimated to jump from 4.78 percent this year to 33.6 percent in 2014-15.
PDE will approve the referendum exception request if a review of the data demonstrates that the school district qualifies for one or more of the exceptions, the documents state.
If the request for an exception is approved, PDE will determine the dollar amount of the expenditure for which the exception is sought and the tax rate increase required to fund the exception.
However, if PDE denies the request, the school district must reduce the tax rate increase to no more than its index or submit a referendum question for voter approval.
School boards are not yet discussing the possibility of raising taxes that high. Instead, they are lobbying the state Legislature to reform the pension system so they won’t see the high pension rate spikes.
The state kept the rate that districts pay into the system artificially low over the past decade. A majority of teachers union members have contributed 7.5 percent since 2001. Over the past decade, they have paid more than $7.3 billion into the system, while the state and districts combined paid $3.765 billion into the system.
In preparation for the rate spikes to come, some districts are putting money aside.
Trinity Area School Board member Scott Day, who is also on the board’s finance committee, said he would like to carve 5 to 10 percent out of the 2010-11 budget to put aside for pension costs.
“My intent is not to raise taxes,” he said. “For the next couple years, we are going to try and hold the line.”