Dear Mr. Governor1

Jim Pawelczyk, PhD2 Board of School Directors, State College Area School District State College, PA March, 2015

Dear Mr. Governor:

Thank you for a bold budget proposal. Your breathtaking suite of reforms promises fairness for Pennsylvania. What is inherently unfair, however, is passing the cost of Harrisburgs risky decisions about the Pennsylvania School Employees Retirement System (PSERS) to school districts and property owners. Were only seeing the tip of the iceberg; responsible actuarial analysis with more realistic rates of return puts PSERS total unfunded liability in the neighborhood of $60 billion, or $12,000 per household. Thats a much bigger problem than PSERS actuaries currently acknowledge.

Ill take you at your word: youre serious about improving public school funding, and you welcome new ideas. The same goes for the legislature: theyre serious about pension reform. If so, then allow me to share some alternative thinking about pension funding.

We teach our kids to take responsibility for their mistakes. Harrisburgs pension funding mistakes are born from a bipartisan attitude that, kicking the can down the road is better than honesty, pragmatism and action. Consequently, legislatures and governors before your tenure broke Pennsylvanias pension systems, and they left it for your watch. As a businessman, you know the common storefront sign: If you break it, you own it. Since Harrisburg legislated the unfunded liability, why not own your mistakes by assuming all of the state pension systems employer costs that exceed the annual premium, or normal cost? That would lower school district pension contributions to about 8% of payroll instead of the 30% of payroll we can look forward to during your term. You could repair a lot of the damage by using your state coffers instead of our school district budgets to pay the debt that Harrisburg created.

Schools could stop fretting about pension bills and focus on learning. Without the ever present worry of increasing pension contributions, school districts could use their savings to address educational needs and reduce property taxes. Every district would benefit. Reducing PSERS contributions to the normal cost would free up $2.6 million in next years State College Area School District budget. Thats worth more than double the increase in Basic Education Funding youve proposed for our District, or half the debt service for the State High reconstruction that

1 An abbreviated version of this article was published in the Centre Daily Times on March 5, 2015 2 The views expressed here are my own and do not necessarily reflect those of the State College Area School

District or the entire Board of School Directors.

http://www.centredaily.com/2015/03/05/4633402/their-view-harrisburg-needs-to.html

begins in June. Either way, for a community that has seen school property taxes increase for 19 of the past 20 years, some relief would be welcome.

No one enjoys property taxes. They are, however, the most stable source of revenue a school district has. The good work that school districts do for their community every day is the justification for local responsibility. If the return on that investment falls below community expectations, then voters tell their school boards in person and at their polling place. I hope you can endorse our buy local mindset.

A government that works needs to pay its bills. It wont be easy when pension funding was neglected for more than a decade. The $150 million in savings you anticipate from your GO TIME program wont be enough to meet a $1.2 billion PSERS payment that will double during your term. Include the State Employee Retirement System (SERS), and the challenge is even bigger. Based on recent analysis from the states Independent Fiscal Office it appears unlikely that the revenue from a gas severance tax will be enough. Im forced to conclude that your pension payments will require even more revenue. Your proposals to increase the state income and sales taxes, while distasteful, are safer bets to meet your pension obligations than speculating on prohibited bonds. After all, were serious about this, right?

When your pension payments are sufficient, then use what remains to ensure that educational funding is adequate where you have evidence that its not. Adequacy, like equity are pretty broad concepts that can be interpreted in many ways. I look forward to learning more about your definitions of both.

You set an ambitious goal to provide 50% of public education funding from the Commonwealth. Representing a school district that receives 15% of its revenue from the Commonwealth, and whose state funding per student ranks 484 out of 500 - less than half of the state median - your proposal is music to my ears.

Funding education through a combination of increased sales and income taxes certainly isnt a new idea; its pretty close to what House Majority Leader Reed proposed in HB 2425 last session. That bill stalled in committee.

So, based on past performance, I am skeptical that Harrisburg has the wherewithal to meet a 50% funding commitment for all school districts. Nevertheless, your can do attitude is refreshing. Perhaps it will infect the legislature.

In summary, if you want to reinvent government, money is not the answer. Money is an expectation that preceded every governor before you, and will probably succeed ever governor after you. What school districts need now is stability. For our public education system, its a priceless commodity. You and your partners in the legislature can help us by eliminating the risks that you foist on school districts through pension reamortization and bonding schemes, unrealistic assumptions and unfunded mandates. Own your mistakes and deflect the risks and consequences of poor legislating away from school districts. Pay the overpromised,

underfunded pension bill that Harrisburg created. By doing so, youll free up local revenue for school boards to address equally thorny issues like educational need and property tax reform issues that are best addressed in our communities.

You have a very large pension debt to pay, and school boards have districts to govern. If you do your part, then we can do ours.

The Governors budget proposal can be found at: http://www.budget.state.pa.us/portal/server.pt/community/current_and_proposed_commonwealth_budgets/4566

http://www.budget.state.pa.us/portal/server.pt/community/current_and_proposed_commonwealth_budgets/4566http://www.budget.state.pa.us/portal/server.pt/community/current_and_proposed_commonwealth_budgets/4566