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Pennsylvania Association of School Business Officials
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Developing educational leaders in school operations
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PSERS Information
PSERS Certification of 2008-09 Employer Contribution Rate
The PSERS Board met today to certify the Employer Contribution Rate (ECR) for the next fiscal year. The Board certified a rate of 4.76%, down from this year’s ECR of 7.13%. (See the PSERS news release in the News Box on the PASBO home page.)
However, PDE has notified LEA’s that 2008-09 budgets should reflect the current ECR. Why?
Legislation has passed the Senate that would establish a floor for PSERS as currently exists for the State Employee’s Retirement System. Senate Bill 826 would create a floor for the 2008-09 ECR of 6.44% plus the premium assistance charge for the PSERS health supplement. PSERS has set the premium assistance add-on for 2008-09 at .76 making the total estimated ERC 7.20% if Senate Bill 826 is enacted. The bill passed the Senate unanimously on December 4. It has been referred to the House Education Committee. To read the entire bill, go to this link:
http://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?syear=2007&sind=0&body=S&type=B&BN=0826
The Rendell Administration is also working on a more comprehensive retirement solution that may be amended into Senate Bill 826. In either case you should be aware that PSERS can recertify a revised ECR.
WHAT WILL THIS MEAN FOR RETIREMENT EXCEPTIONS UNDER ACT 1?
We have asked PDE for guidance on this question and it is under review. As soon as we have a definitive response we will notify you immediately.
WHY IS A FLOOR A GOOD IDEA?
A floor for the ECR will help to alleviate the huge spike that will occur in 2012-13 of almost 12%. If the current PSERS law is not changed, the ECR will stay at about 4.76% for the next four years. Then in the spike year, there will be about a 7% jump in the ECR. Each 1% increase in the ECR will cost schools and the Commonwealth in excess of $100 million under current assumptions. In total we believe that an $800 million conservative estimate of the spike will have a disastrous financial impact on schools. Therefore, imposing a floor will help to blunt some but certainly not all of the increase in the spike year. It is good public policy from our perspective.
WHAT HAPPENS IF WE ADOPT OUR PRELIMINARY BUDGET AND THE ECR CHANGES?
We are urging the Administration and the General Assembly to enact any change now so schools will know with certainty the ECR before preliminary budgets are adopted. However, it is likely that the change in law could be made after the January date for adoption of preliminary budgets and the resolution to not exceed the index. A good strategy is to use the current year ECR to prevent an increase in expenditures after adoption of preliminary budgets or the resolution to not exceed the index.
The PSERS Board met today to certify the Employer Contribution Rate (ECR) for the next fiscal year. The Board certified a rate of 4.76%, down from this year’s ECR of 7.13%. (See the PSERS news release in the News Box on the PASBO home page.)
However, PDE has notified LEA’s that 2008-09 budgets should reflect the current ECR. Why?
Legislation has passed the Senate that would establish a floor for PSERS as currently exists for the State Employee’s Retirement System. Senate Bill 826 would create a floor for the 2008-09 ECR of 6.44% plus the premium assistance charge for the PSERS health supplement. PSERS has set the premium assistance add-on for 2008-09 at .76 making the total estimated ERC 7.20% if Senate Bill 826 is enacted. The bill passed the Senate unanimously on December 4. It has been referred to the House Education Committee. To read the entire bill, go to this link:
http://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?syear=2007&sind=0&body=S&type=B&BN=0826
The Rendell Administration is also working on a more comprehensive retirement solution that may be amended into Senate Bill 826. In either case you should be aware that PSERS can recertify a revised ECR.
WHAT WILL THIS MEAN FOR RETIREMENT EXCEPTIONS UNDER ACT 1?
We have asked PDE for guidance on this question and it is under review. As soon as we have a definitive response we will notify you immediately.
WHY IS A FLOOR A GOOD IDEA?
A floor for the ECR will help to alleviate the huge spike that will occur in 2012-13 of almost 12%. If the current PSERS law is not changed, the ECR will stay at about 4.76% for the next four years. Then in the spike year, there will be about a 7% jump in the ECR. Each 1% increase in the ECR will cost schools and the Commonwealth in excess of $100 million under current assumptions. In total we believe that an $800 million conservative estimate of the spike will have a disastrous financial impact on schools. Therefore, imposing a floor will help to blunt some but certainly not all of the increase in the spike year. It is good public policy from our perspective.
WHAT HAPPENS IF WE ADOPT OUR PRELIMINARY BUDGET AND THE ECR CHANGES?
We are urging the Administration and the General Assembly to enact any change now so schools will know with certainty the ECR before preliminary budgets are adopted. However, it is likely that the change in law could be made after the January date for adoption of preliminary budgets and the resolution to not exceed the index. A good strategy is to use the current year ECR to prevent an increase in expenditures after adoption of preliminary budgets or the resolution to not exceed the index.