Kudos for teacher pact, budget, but pension bill is a lemon

Common sense prevails in UCF budget, teacher pact, not so much with pension scheme

By Mike McGann, Editor, The Times
CoupDeVilleWith so much going on in Unionville this week, one almost doesn’t know where to start.

Okay, almost.

The tentative deal announced Monday by the Unionville-Chadds Ford School District and the Unionville-Chadds Ford Education Association happened with very little fuss, very little noise and yet appears to be a good thing for the district, its students and the community at large.

Although neither side was willing to divulge the details, based on the numbers presented last month as the gap, a reasonable splitting the difference guess puts it in the category of deals no one loves but everyone can live with. All this without any of the acrimony seen last time, when teachers went more than a year without a new contract.

As a voice who has often argued forcibly at times for common sense in these talks, I have to give all involved a pat on the back.

From here, it looks that everyone found a balance of needs, set aside political rhetoric and got a deal done. Kudos all around.

Similarly, I have to congratulate the Board of Education for its no-drama 2013-14 budget process. The two (well, three sort of) options that will be discussed this Monday night are all as board member Frank Murphy put it the other night during the budget hearing, ‘palatable.’

My two cents: the smart money (excuse the pun) takes the 2.01% budget recommended by Superintendent of Schools John Sanville. It’s hardly extravagant and if you took away the ludicrous pension cost increases, it manages to improve programs, keep current staffing levels and compensates for a declining real estate tax base. Without the pension mess, it seems possible that local school taxes could have actually gone down, the way the current fiscal management has tightened spending.

So, again, it seems like common sense is prevailing when it comes to the schools – and while it doesn’t provoke sexy headlines or tens of thousands of page views for us, it is ultimately good for the community. I’ll take that every day of the week.

But, then there’s those pesky public pensions.

The good news is that someone in Harrisburg is finally focused on a fix — Gov. Tom Corbett and Unionville’s own State Representative Chris Ross.

Tuesday, Corbett, Ross and a few dozen other elected and state officials gathered for a press conference to announce that Ross would sponsor Corbett’s pension reform bill in the house.

The good news: if the plan gets through the legislature and the courts, it would cut the short-term rate of pension fund contributions. It would, assuming the state Supreme Court signs off on it (no sure matter), cut some pension obligations moving forward for existing state employees and teachers, by changing vesting rules and multipliers in the future. The public unions, basically seeing a non-negotiated cut in benefits are not particularly amused.

Also in the category of good news: It doesn’t touch any current retirees’ benefits.

So far, so good (assuming the courts sign off on it).

But (and you knew there had to be a “but”), it’s the big, largely trumpeted conversion of new employees to a defined contribution plan from a defined benefit plan that seems a little concerning.

As you may be aware, pension funds and even Social Security have a certain amount in common with Ponzi schemes. That’s not to say it’s illegal, immoral or bad, just reflecting the inevitability of math.

If money doesn’t come in at the bottom, from young workers many, many years from retirement, there’s no money to pay the older workers when they retire.

So it begs the question: If we switch all new workers starting in 2015 to a 401K-like retirement, where money sits in specific user accounts, we will see less and less money paid into the pension system and a greater percentage of participants collecting versus paying, it seems like it would create a financial nightmare that makes the current situation seem like little more than a minor annoyance.

On the one hand, it’s nice after 12 years someone is stepping forward to do something, but on the other hand, if the solution bankrupts the state and any number of local school districts, 15 to 20 years from now, maybe it’s not such a good idea.

Correct me if I’m wrong, but this isn’t kicking the can down the road, it’s using a North Korean missile launcher to rain down potential disaster on our kids and grandkids, with unpredictable results.

From my point of view, I like the changes on vesting and multipliers, although I know the workers currently in the system won’t. But there has to be some adjustment — okay, a fix — to the extremely foolhardy 2001 pension expansion.

And I do I agree that ultimately, state workers and teachers need to be in a defined contribution system. Pensions have proven unsustainable in both the private and public sectors.

But I think two things need to happen: A lump sum payment of a couple of billion dollars needs to go into the pension funds. This would be, essentially, a downpayment on repaying the money the state essentially borrowed from the system by not properly funding it over the last 12 years. I kind of liked Sen. Dominic Pileggi’s out of the box idea to bond the lump sum, as bond interest is lower than investment interest — potentially making it a long-term winner.

Second, a hybrid retirement system needs to be created to phase in over the next 30 years to manage the end of the pension system without bankrupting it, the state or local schools.

It won’t be easy, it won’t be quick, and it probably isn’t the sort of quick fix that gets a governor with wretched approval numbers reelected. But it is the responsible thing to do.

And what do you think is more likely?

The folks in Harrisburg doing something responsible, or me (or my son) writing scores about how some half-baked legislation in 2013 is about to cause a financial tsunami in 2026-27? (Eerily similar to how everyone is in a rush to blame the 2001 law, including a number of folks who voted for it.)

Yeah, me too. You might want to share that with your favorite elected official if you get a free moment.

One last thing on pensions: There’s seems in a few quarters this continuing desire to want to blame the workers for the pension mess, that it is somehow their fault, and not the result of poor fiduciary management by the state legislature.

Just so we’re clear on the facts: The pension mess wasn’t created by the guy teaching your kid 11th-grade history. It was, in fact, created, by the state legislature, including two local sitting members of the house — Chris Ross and Steve Barrar — who voted for the 2001 pension changes, and three governors, Tom Ridge, Ed Rendell and Tom Corbett, who have failed to address it, and in some cases made it worse. Senators Andy Dinniman and Dominic Pileggi get a half pass — neither was serving in the legislature when this mess was created, but neither has exactly been a voice demanding the problem be fixed, either.

For the life of me, when your school taxes go up — and very likely they wouldn’t be were it not for the pension mess — every last cent of blame goes to our pals in Harrisburg, not the teachers.

And if someone is insisting otherwise, it might be time to look just a bit more closely at their motivations.

* * *

Congratulations to the Unionville High School baseball team on winning the Ches Mont American Division championship. Second year-coach Mike Magee really has done a fabulous job turning the Indians into an elite program quickly. Kudos to him and a talented bunch of players — who look to do a lot of damage in the playoffs.

* * *

We’ll have more on the After-Prom next Monday, but a couple of things: There’s a lot of excitement about the event returning to Unionville High School, and once again, Scott Honda has stepped up and donated a nice car for some lucky student.

I’m always impressed at the dedication and hard work of the parents involved with the After-Prom — and this year’s theme remains a tightly guarded secret. Don’t ask me, I don’t know what it is, either, but am told it’s something pretty cool.

One other note: as usual, we’ll be running those pre-prom pictures, so you can send them to me at mike@unionvilletimes.com.

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  1. Observing says:

    I think getting future teachers into a defined contribution plan instead of a defined benefit plan. Certainly a “hybrid” will be needed for a period of time but we should think long term or the pension crisis of 2010-15 will become the pension crisis of 2027-2031. Market risks and benefits should be borne by the person who has direct “skin in the game” and not funded by tax payers or (in the case of private enterprise) shareholders.

  2. Keith Knauss says:

    A couple of comments –

    1. You have attributed the pension mess solely to the state legislature due to passage of Act 9 of 2001 (HB 26). Every study I’ve seen gives equal blame or more to the market downturns of 2001 and 2008. Even the PSBA (self serving) only attributes 9% of the current unfunded liability to Act 9.

    Was it poor judgement on the part of the legislators? Only in hindsight. Stellar market returns over the previous decade had caused the funding ratio of PSERS and SERS to be above 120% in 2001. PERC’s evaluation of the legislation gave no hint of problem. A reasonable legislator looking at the evidence available at the time could have made a case for passage of Act 9.

    2. You have assigned no blame to the teachers. I agree that any individual teacher is blameless, but let’s look further to their union representatives – the PSBA. It has been reported that PSBA was lobbying hard for Act 9’s passage in 2001. And why not? It was a huge win for the rank and file.

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