Property tax bills in the Selinsgrove Area School District are going up about $35 this year to meet the school's obligation in Pennsylvania's teacher pension crisis, and are projected to soon jump by more than $200.
Similar hefty tax increases will be felt in communities across the state due to the underfunded Public School Employees' Retirement System (PSERS).
"It's unsustainable," said Jeffrey Hummel, business manager at Selinsgrove Area School District.
Districts statewide are paying 8.22 percent more in pension contributions this year and will see another 10.5 percent rise next year. By 2012-13, the rate is expected to soar to nearly 30 percent and continue to climb the next few years.
If those rates stand, Lewisburg Area School District property owners will pay $265 more over the next four years to meet the rising retirement costs, Superintendent Mark DiRocco said.
"To have to absorb that amount in that short amount of time ... every school district will be cutting programs and real estate taxes will skyrocket," DiRocco said.
Hummel shakes his head at the thought, noting that the average $1,500 tax bill in Selinsgrove will rise $35 this year to cover higher pension costs.
By 2012-13, when costs rise to 29.22 percent, property taxes will jump an astonishing $210 in that year's budget alone.
Hummel is confident the state Legislature will step in before that spike occurs. Otherwise "it would bankrupt school districts and the state," he said.
The state Legislature is working on a solution and the Republican Caucus will make recommendations in a week or so, said state Rep. Merle Phillips, R-108, of RD2 Sunbury.
"Something has to be done to ease the requirements of the cost," he said.
There are more than 547,000 active and retired members of the PSERS pension plan, and about $4.9 billion in benefits were paid out last year.
The money comes from employees who contribute 7.5 percent, and from the commonwealth, school districts and returns on investments in the stock market.
For the past 25 years, a majority of the funding — about 65 percent — had come from stock market investment earnings. As the market flourished, the amount of benefits paid out were increased to 25 percent.
But then investments began turning sour several years ago, and instead of requiring employer payments to steadily rise, the Legislature had allowed school district contributions to fall to about 1 percent in 2001, and hoped the market would rebound and the money would pour in.
It didn't, and then the bottom fell out of the economy in the past couple of years.
Now the pension fund has dwindled and the state still has to pay its obligations.
"We've made some mistakes in allowing school districts to pay so little, and in the short-term, it will cost," said state Rep. Russ Fairchild, R-85, of Lewisburg.
While it's too soon to say what recommendations will be proposed, Phillips anticipates employees will be asked to contribute more and the federal government may be asked to help out.
A long-term solution could involve overhauling the pension system and reducing benefits for new members.
"It's not an immediate solution, but it would help," Phillips said.
Fairchild said the system will have to be changed, even though unions will resist.
He doesn't support a plan favored by Gov. Ed Rendell and the Pennsylvania Association of School Business Officials to stretch out payments and give the state and districts 10 years to fund the liabilities.
Whatever the solution, everyone agrees resolving the financial crisis won't be easy, especially in the shadow of a gubernatorial election.
"They always seem to be deciding these issues on an election cycle," DiRocco said.
n E-mail comments to mmoore@dailyitem.com.
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