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Pa. schools desperate for pension relief

Just how desperate are Pennsylvania schools for some kind of help coping with the crushing financial burdens imposed on them by the state’s pension crisis?

Monday night, a member of the Central Dauphin School District i Harrisburg will ask colleagues to consider supporting a state tax on financial transactions, like buying stock. PennLive.com has reported that the board decided to vote Sept. 22 on a modified version of the resolution.

The prospects of the state passing a tax like that are about as likely as Ed Rendell going mute or the Susquehanna River reversing course and flowing north.

But the call for such an unlikely source of relief speaks to the enormous financial pressures facing Pennsylvania school districts.

State funding for schools has increased since the cuts inflicted during the Great Recession. However, state money has not kept pace with escalating costs, driven in large part by catch-up payments to help fill the state’s multi-billion dollar pension funding gap.

Property tax increases have stimulated a political backlash in many school districts.

State funds cover only about 35 percent of school costs, according to the Pennsylvania Association of School Boards, while the average in other states is about 44 percent. Back in the mid-1970s, Pennsylvania funded more than 50 percent of local school budgets.

Many districts have had to make painful cuts or steadily increase property taxes — or both. Those property tax increases have stimulated a political backlash in many school districts.

That backlash is being felt in the state capitol. A bill to eliminate school property taxes altogether is getting serious attention in Harrisburg. The lost funds would be replaced by new state money from boosting sales and income taxes.

This year’s state budget offers no real relief to financially stressed schools. With revenues falling short of projections, lawmakers faced a $1-billion plus gap, which they filled with one-time measures and accounting gimmicks.

Schools need relief from a problem not of their own making. They’re having to make up for years when lawmakers relied on booming investment markets to cover the state’s share of pension obligations, instead of depositing sufficient amounts of new money. When the Great Recession hit, and financial markets cratered, the state was left with a huge pension gap that has not been filled, even as the stock market hits new highs.

Changing pension rules for new employees will only produce savings far into the future. Depending on how the changes are structured, they can actually worsen the funding gap in the short term, by stopping the flow of new money into pension funds.

It’s important to remember that today’s pension crisis is not the fault of current employees. All along, they paid their full share for the pensions they have been promised. It is state lawmakers whose short-sighted decisions boosted payouts while leaving the pension funds short of money to pay what the state owes in the decades to come.

There is no easy way of fixing the pension crisis while being fair to both taxpayers and existing employees. That’s why the issue has, so far, defied resolution. But there is no more important work for the Legislature to do when it returns to work next week.

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