Teachers pension reform bill likely dead

Political considerations appear to trump needs of school districts such as Unionville as state Senate, House clash over bill

By Mike McGann, Editor, UnionvilleTimes.com

Republican and Democratic legislators were unable to reach deal on teacher pensions, dumping the issue back in the laps of local school boards, such as Unionville's.

Political gamesmanship — and a fight over taxes for the Marcellus Shale Gas Field — appear to have doomed any hope for a state teachers’ pension reform bill before next year. That means the ongoing concern about a 32% hike in pension contributions for the 2012-13 school year will continue to cast a long shadow over the ongoing negotiations between the Unionville-Chadds Ford School District and its teachers union.

Last week, the state Senate approved a House of Representatives measure that would cap increases on pension contributions and cut back benefits for new teachers. In addition, the changes would place some of the risk for return of pension’s investment plan on the pension holders and restrict payouts to employees meeting the “Rule of 92” — the employees combined age and years of service must add up to 92 before retirement benefits can be used.

While House Democrats might take issue with some of the pension-related changes made by the state Senate — the amended bill is likely a non-starter in the lower house because Democrats claim the bill, as amended by the Senate, violates the state Constitution, as it now takes up more than one issue (the senate added a fiscal oversight panel to the bill, a provision seemingly unrelated to the teacher pension issue). This comes weeks after the GOP made the same allegations against the Democrats regarding the tax bill for the Marcellus Shale.

With the Democrats in control of the house through the end of the session — no vote on the bill is scheduled to occur before the Nov. 2 elections — it seems highly unlikely that the measure will be taken up before the end of the session with a lame duck house, effectively killing it. Any hope of pension reform will probably have to start from scratch next year — and if polls are accurate — could be shaped entirely by a Republican legislature and governor. That could mean the end of so-called “defined benefit” style pensions for new hires — replaced by defined contribution plans, more like 401K retirement accounts.

Meanwhile, that leaves school districts like Unionville hanging — forced to plan and negotiate on the basis of having large spikes, as much as $10 million per budget year  in additional contributions to teachers’ pension plans while local tax revenue is either flat or slipping because of property reassessments and drops in the amount of transfer tax, due to the weak real estate market.

That pension hit acts like a multiplier for each additional dollar of salary paid out — a major sticking point in the current contract negotiations. The teachers argue that he pension fund is beyond their control and shouldn’t be factored into the financial proposals, while the school board argues that the size of the pay increases will be reflected in higher pension contributions as well, meaning higher spending by the district.

Although likely dead, the senate bill would have provided some fiscal certainty to school boards such as Unionville’s. The pension contribution rates would be set every three years and could only increase ½% at a time. The maximum contribution rate for for district for their teachers would have been capped at 12.3%. Some of these provisions may be brought forward again when the legislative process starts again in January, 2011, but it seems highly unlikely that legislation can be passed in time to impact the 2011-12 school budget process.

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