From the BCCT.
Outrageous benefits come at taxpayers expense
Bucks County Courier Times
Your editorial on Pennsylvania state pensions is so true and on target. The cost of the outrageous pension increases that our protected criminal class (a.k.a. the state Legislature) gave themselves in 2001 is coming home to roost. The Legislature took a 50 percent pension increase and gave the teachers, the most influential group in the Legislature, a 25 percent increase as the price for its own increase.
On Dec. 11, Pennsbury's administration provided the board and community with a five-year projection of the district's financial condition using data provided before the latest information from the Teachers' Retirement System estimating that pension costs will be 16.4 percent of salaries in 2012-13 vs. 4.7 percent in the coming year.
The numbers provided by Pennsbury's administration presented the board with frightening options. I have requested a new five-year projection based on the Retirement' System's latest projections and this projection can only be more frightening. The options will be: double-digit tax increases; larger class sizes; draconian cuts in bus service and student activities or some combination thereof.
When these are combined with the ever-increasing unfunded mandates on special education and other things, the money put into educating non-special education children (the average reader's children) will shrink more while the privileged will get their pensions and the legislators will get their lifetime health benefits at no cost.
There are two ways to change this picture. One requires a change in the state Constitution so these outrageous benefits can be scaled back. The other would be for the state to declare bankruptcy. I suppose two more solutions could be a Dow Jones average of 25,000 or a bailout from the federal government. The last two are out of our control.
Many of us will have gone bankrupt along with the state should that be the path. The only reasonable path to help all of us is to change the Constitution so public sector pensions mirror those of the taxpayers. I am not saying that public employees do not deserve pensions but the taxpayer does not deserve being forced into bankruptcy to provide them.
The solution to the problem is in the hands of those who created it. Will the Legislature step up and solve this problem? Not unless each of us forces the issue and demands reform.
Richard B. Johnson
Pennsbury school director Region 3
Monday, January 12, 2009
Tough queries likely at pension powwow
From the Inquirer
PhillyDeals: Tough queries likely at pension powwow
By Joseph N. DiStefano Posted on Sun, Jan. 11, 2009
Jeffrey Clay runs the $55 billion Pennsylvania Public School Employees' Retirement System, which cuts checks worth more than $4 billion a year for retired teachers and other public-school workers.
It's the biggest investment fund in Pennsylvania, which means that, like other investment funds, it's not as big as it was last year.
Clay is starting to gear up for the annual pilgrimage by state agencies to Harrisburg's stone-domed Capitol.
He'll explain to senators and representatives what his staff plans to spend this year, and how much more it will cost the citizens of the state to keep the checks coming to 170,000 school retirees and survivors.
I've gone to those hearings a couple of times. When markets were up, you didn't see tough questions. The reps accepted what they were told by Clay or his counterparts at the State Employees' Retirement System. Though there's always someone who wants to know: If you're doing so well, can we increase benefits to my constituents?
Clay has attended these hearings since he joined PSERS as deputy chief legal counsel in 1990. But at this year's hearings in early March, he's expecting there'll be more than the usual interest. Maybe some sparks.
"My guess is we'll hear about the rate cycle, hedge funds, and the bonus issue," Clay said.
The "rate cycle" means the formula by which this state has chosen to finance public pensions, usually by pushing the expense as far into the future as possible and hoping the market does really, really well next year.
The school pension "employer-contribution rate" is a big deal for PSERS at the moment. The state subsidy is paid partly by state taxes and partly by local school districts. So when the rate goes up, so do property taxes.
The subsidy is currently projected to quadruple, to $2.3 billion a year, by 2011-12. And that assumes markets recover during the current fiscal year.
The losses of hedge funds are in the news, but they are more an issue at PSERS's smaller, more radical twin, the SERS, which has more of its money invested with hedge, private-equity and other alternative investments than any other major pension fund, and hasn't told us yet how much they all lost last year.
As to bonuses, Clay's agency has been beaten up for giving managers $854,000 in bonuses this year, despite the fund's falling 17 percent for the 12 months ended Sept. 30.
The way investment pros look at the world, even though PSERS shrank, it did better than many of its peers. To private-sector fund managers, who are paid a lot more than the civil servants who run PSERS, "relative outperformance" means you did a good job, and deserve something extra.
But to the tax-paying public angry over its own shrinking 401(k) and IRA accounts, a loss is a loss, and Republicans like State Sen. John Rafferty, who represents parts of Chester, Montgomery and Berks Counties, have asked for the bonuses back.
I'm less worried about the thousands PSERS pays its staff than the hundreds of millions it pays outside managers, whose performance is not recorded in its annual reports.
Better to ask how the state plans to either boost subsidies or to cut benefits for future retirees - and why SERS and PSERS should keep trying so hard to boost investment returns, exposing taxpayers to risk, and hiring expensive outside managers to run those assets, if it doesn't have more to show for the effort.
Add the $1 billion teachers pay PSERS in payroll deductions every year - which rises every year with contracted teacher salaries and new hires - plus the $2.3 billion PSERS is supposed to raise from state and local taxpayers by 2011-12, and
we're getting to where the amount spent to finance PSERS each year approaches the amount it spends on pensions.
If those lines cross, why not just scrap all the fancy foreign investments and commodity pools, spend down the existing funds, and pay the checks as they come due?
"There is a pay-as-you-go system," Clay told me. "It's Social Security," and "it's out of control," as the number of retirees explodes, compared with workers paying into the system.
PhillyDeals: Tough queries likely at pension powwow
By Joseph N. DiStefano Posted on Sun, Jan. 11, 2009
Jeffrey Clay runs the $55 billion Pennsylvania Public School Employees' Retirement System, which cuts checks worth more than $4 billion a year for retired teachers and other public-school workers.
It's the biggest investment fund in Pennsylvania, which means that, like other investment funds, it's not as big as it was last year.
Clay is starting to gear up for the annual pilgrimage by state agencies to Harrisburg's stone-domed Capitol.
He'll explain to senators and representatives what his staff plans to spend this year, and how much more it will cost the citizens of the state to keep the checks coming to 170,000 school retirees and survivors.
I've gone to those hearings a couple of times. When markets were up, you didn't see tough questions. The reps accepted what they were told by Clay or his counterparts at the State Employees' Retirement System. Though there's always someone who wants to know: If you're doing so well, can we increase benefits to my constituents?
Clay has attended these hearings since he joined PSERS as deputy chief legal counsel in 1990. But at this year's hearings in early March, he's expecting there'll be more than the usual interest. Maybe some sparks.
"My guess is we'll hear about the rate cycle, hedge funds, and the bonus issue," Clay said.
The "rate cycle" means the formula by which this state has chosen to finance public pensions, usually by pushing the expense as far into the future as possible and hoping the market does really, really well next year.
The school pension "employer-contribution rate" is a big deal for PSERS at the moment. The state subsidy is paid partly by state taxes and partly by local school districts. So when the rate goes up, so do property taxes.
The subsidy is currently projected to quadruple, to $2.3 billion a year, by 2011-12. And that assumes markets recover during the current fiscal year.
The losses of hedge funds are in the news, but they are more an issue at PSERS's smaller, more radical twin, the SERS, which has more of its money invested with hedge, private-equity and other alternative investments than any other major pension fund, and hasn't told us yet how much they all lost last year.
As to bonuses, Clay's agency has been beaten up for giving managers $854,000 in bonuses this year, despite the fund's falling 17 percent for the 12 months ended Sept. 30.
The way investment pros look at the world, even though PSERS shrank, it did better than many of its peers. To private-sector fund managers, who are paid a lot more than the civil servants who run PSERS, "relative outperformance" means you did a good job, and deserve something extra.
But to the tax-paying public angry over its own shrinking 401(k) and IRA accounts, a loss is a loss, and Republicans like State Sen. John Rafferty, who represents parts of Chester, Montgomery and Berks Counties, have asked for the bonuses back.
I'm less worried about the thousands PSERS pays its staff than the hundreds of millions it pays outside managers, whose performance is not recorded in its annual reports.
Better to ask how the state plans to either boost subsidies or to cut benefits for future retirees - and why SERS and PSERS should keep trying so hard to boost investment returns, exposing taxpayers to risk, and hiring expensive outside managers to run those assets, if it doesn't have more to show for the effort.
Add the $1 billion teachers pay PSERS in payroll deductions every year - which rises every year with contracted teacher salaries and new hires - plus the $2.3 billion PSERS is supposed to raise from state and local taxpayers by 2011-12, and
we're getting to where the amount spent to finance PSERS each year approaches the amount it spends on pensions.
If those lines cross, why not just scrap all the fancy foreign investments and commodity pools, spend down the existing funds, and pay the checks as they come due?
"There is a pay-as-you-go system," Clay told me. "It's Social Security," and "it's out of control," as the number of retirees explodes, compared with workers paying into the system.
Transfer tax plunge pinching budgets
From the BCCT.
Transfer tax plunge pinching budgets
By: JENNA PORTNOY, Bucks County Courier Times
Bad news keeps coming for local governments and school districts that rely on real estate sales to generate revenue.
Taxes and fees collected by the Bucks and Montgomery counties' recorders of deeds were uniformly down in 2008, according to year-end figures released last week.
"We all know the economy is in a bad situation and that's reflected in the yearly report," said Bucks County Recorder of Deeds Ed Gudknecht.
Every time a property changes hands, the counties' elected recorders of deeds office levies a tax of 2 percent on the property's market value. Of that number, 1 percent goes to the state. The municipality and school district where the property is located split the other 1 percent. This levy is called the real estate transfer tax. A drop in overall sales has meant a dramatic decrease of nearly 20 percent for local governments.
The total transfer tax remitted to Bucks townships and boroughs was down about $4 million in 2008, compared with the 2007 total of $21 million. The same goes for 16 school districts.
In Montgomery County, school districts and municipalities lost $10 million - about 30 percent - in transfer tax collection.
The Hatboro-Horsham School District will bring in about 55 percent less transfer tax, for a hit of nearly $910,000, bringing the 2008 total to about $728,000.
Montgomery County Recorder of Deeds Nancy J. Becker said the school district is far from alone.
"It looks like the economy hit everyone, with an across-the-board decrease in the number of transactions and tax revenue, although the growth areas, such as the North Penn area, were hit the worst financially," she said.
New Hope-Solebury School District took the biggest percentage hit of Bucks' school districts. In 2007, the district brought in more than $1 million, but last year the number nose-dived more than 40 percent to about $600,000.
Gregory Hogg, the district's business administrator, said the number is significant considering current fiscal year revenues should total about $31 million.
"It is going to be reflected in next year's budget because we have to make up for that loss," he said, adding that he will present these and other numbers to the board Jan. 21.
Municipalities, however, have already had to grapple with decreases in various taxes and revenue streams in 2009 budgets passed last month.
Based on monthly transfer tax checks from the county, Doylestown Township predicted within a few thousand dollars that its figure would be down about 30 percent to about $456,000 in 2008.
The 2009 budget anticipates a similarly bleak view, said finance officer Bill Wightman.
"We have a balanced budget and we managed to do it without raising taxes. We knew we were getting less money," he said. "We know that the market out there is not too good."
Dismal sales affected other revenue streams collected by recorders of deeds. For example, in Bucks, about $3.4 billion worth of property changed hands in 2008, compared with $4.3 billion in 2007. Last year's figure represents the biggest drop since 2002.
Interest on the office's various bank accounts was down to about $38,000 last year, compared with four times as much in 2007. Finally, the office recorded 102,199 documents last year, the lowest figure since 1997.
"Times are bad," said Gudknecht, "but we just keep going on and hope things will improve."
Transfer tax plunge pinching budgets
By: JENNA PORTNOY, Bucks County Courier Times
Bad news keeps coming for local governments and school districts that rely on real estate sales to generate revenue.
Taxes and fees collected by the Bucks and Montgomery counties' recorders of deeds were uniformly down in 2008, according to year-end figures released last week.
"We all know the economy is in a bad situation and that's reflected in the yearly report," said Bucks County Recorder of Deeds Ed Gudknecht.
Every time a property changes hands, the counties' elected recorders of deeds office levies a tax of 2 percent on the property's market value. Of that number, 1 percent goes to the state. The municipality and school district where the property is located split the other 1 percent. This levy is called the real estate transfer tax. A drop in overall sales has meant a dramatic decrease of nearly 20 percent for local governments.
The total transfer tax remitted to Bucks townships and boroughs was down about $4 million in 2008, compared with the 2007 total of $21 million. The same goes for 16 school districts.
In Montgomery County, school districts and municipalities lost $10 million - about 30 percent - in transfer tax collection.
The Hatboro-Horsham School District will bring in about 55 percent less transfer tax, for a hit of nearly $910,000, bringing the 2008 total to about $728,000.
Montgomery County Recorder of Deeds Nancy J. Becker said the school district is far from alone.
"It looks like the economy hit everyone, with an across-the-board decrease in the number of transactions and tax revenue, although the growth areas, such as the North Penn area, were hit the worst financially," she said.
New Hope-Solebury School District took the biggest percentage hit of Bucks' school districts. In 2007, the district brought in more than $1 million, but last year the number nose-dived more than 40 percent to about $600,000.
Gregory Hogg, the district's business administrator, said the number is significant considering current fiscal year revenues should total about $31 million.
"It is going to be reflected in next year's budget because we have to make up for that loss," he said, adding that he will present these and other numbers to the board Jan. 21.
Municipalities, however, have already had to grapple with decreases in various taxes and revenue streams in 2009 budgets passed last month.
Based on monthly transfer tax checks from the county, Doylestown Township predicted within a few thousand dollars that its figure would be down about 30 percent to about $456,000 in 2008.
The 2009 budget anticipates a similarly bleak view, said finance officer Bill Wightman.
"We have a balanced budget and we managed to do it without raising taxes. We knew we were getting less money," he said. "We know that the market out there is not too good."
Dismal sales affected other revenue streams collected by recorders of deeds. For example, in Bucks, about $3.4 billion worth of property changed hands in 2008, compared with $4.3 billion in 2007. Last year's figure represents the biggest drop since 2002.
Interest on the office's various bank accounts was down to about $38,000 last year, compared with four times as much in 2007. Finally, the office recorded 102,199 documents last year, the lowest figure since 1997.
"Times are bad," said Gudknecht, "but we just keep going on and hope things will improve."
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