Pensions overshadow school district’s financial mess

By Emily Leayman  / October 21, 2016 / News / No Comments @ Pennsylvania Watchdog

As the Erie School District faces a $10 million deficit next school year, it will have to look beyond the $20 million it pays for 2,000 students to attend charter schools.

“I think it’s a red herring, frankly,” said Anthony Pirrello, CEO of Montessori Regional Charter School and a former Erie teacher and administrator. “There are other issues that have much more of an impact.”

After all, pension costs have grown more rapidly than charter school payments.

From 2009-10 to 2014-15, pensions have grown by $11.5 million, while charter school payments grew by $9.8 million. 

(Editor's Note:  Please go to the original to see the chart that should appear here. RK)

“Pension costs have grown more in dollar terms and much more in percentage terms than have charter costs,” James Paul, a senior analyst at the Commonwealth Foundation, told Watchdog.org. “What’s more, charters are the result of parents selecting the best option for their children, while pension costs are deferred salaries to current and former teachers.”

Erie entered state financial watch status after receiving $4 million in one-time emergency state funds. The funds will temporarily help balance the budget for the current school year along with $3.3 million more in state contributions, which resulted from the state’s new funding formula.

Districts cannot legally withhold funding from charter schools and must contribute to the Public School Employees’ Retirement System.

The emergency funding allowed the district to evade cuts for the current school year. In 2017-18, the district will consider closing its four high schools or could cut art and music programs, all-day kindergarten, libraries, sports and extracurricular activities.

Different paths toward a balanced budget

Pirrello told Watchdog.org the district could save $6 million to $7 million by converting two magnet schools into charter schools. He said a conversion would avoid cuts to programs and keep all students enrolled. And since charter schools receive 30 percent less per-pupil funding after the district takes deductions, it would cost less.

Graph by OpenPAgov.org

HIGH DEMAND: As Erie School District looks to fill a projected $10 million deficit,

teachers are asking for a pay raise. Erie’s average teacher salary of $54,938 is lower

 than the state average of $62,002

The teachers union has called for a property tax hike to balance the budget — and give teachers a pay raise. As the district works to eliminate its deficit, it has entered contract negotiations with the teachers union. The average salary for Erie teachers — $54,938 in the past school year — trails Pennsylvania’s median teacher salary of $62,002.

Pirrello, a former teacher and administrator at the school district, thinks teachers are deserving of raises but said, “I don’t know how they’re going to manage it. There’s not going to be money coming from Harrisburg.”

Erie Superintendent Jay Badams told YourErie.com that asking local taxpayers to pay higher property taxes should not be a solution to teacher pay raises. The district’s property tax is already one of the highest in the area.

Solutions beyond property tax hikes, consolidations and cuts would require a nudge from the state government. Badams told GoErie.com that Erie’s financial watch status could convince the state to better fund the northwestern PA district each year. Erie’s $12,000-per-pupil stipend is on the lower end of Pennsylvania school districts, although it is one of the most populous in the state.

“It’s an opportunity to make our case to the state,” Badams said. “We’ll put together a plan to show what we’re able to do locally to try to make the district solvent, and what we’ll likely have to ask of the state. It’s also an opportunity to show what we’d have to do to cut our way to solvency.”

He said that low state funding has fostered reliance on local tax dollars. Erie has requested three tax hikes above the Act 1 index in the past six school years. “Erie administrators often note they are among the lowest funded districts in the state,” said Paul. “While true, this in and of itself is not justification for residents of Pennsylvania’s other 499 districts to send higher taxes to Erie City.”

Paul would rather see Erie better utilize the new state funding formula and see the state work on public pension reform.

Legislators are discussing a 401(k)-type plan for new employees. It would not prevent current retirement costs from spiraling, but it would be a step toward a plan that most private-sector employees utilize. In early October, Susquehanna Polling and Research found that over half of 764 bipartisan Pennsylvania voters support pension reform.

Financial watch requires school districts to submit a plan within 180 days, and Erie’s could go to the state as early as Thanksgiving.

Click here to LEARN HOW TO STEAL OUR STUFF!

Emily Leayman is D.C. Education Reporter at Watchdog. A Kutztown University of Pennsylvania graduate, she has been covering education for nearly four years. Before joining Watchdog, Emily interned at the Washington Examiner and Americans for Tax Reform. She has also covered college free speech issues for the College Fix and school board meetings at the Kutztown Patriot in Pennsylvania. Her stories have been picked up by Drudge Report and The Washington Post among other websites and newspapers. During her college career, Emily received a scholarship for her coverage of faculty union contract negotiations. In addition to reporting on school choice in D.C., she enjoys watching hockey and is working toward visiting all 50 states. Emily can be reached at eleayman@watchdog.org.

• eleayman@watchdog.org