How Lawmakers Can Defuse Pension Time Bomb

Member Group : Stop Teacher Strikes, Inc

One effect of the Pennsylvania Act 1 (tax cap) index is that adding a dollar onto teacher salaries necessitates taking a dollar away from an educational program for a child. So I’m going to do two things today: 1. explain how the recent contract settlement at North Penn School District affects the Pennsbury School District; and, 2. solve the brewing public school employee pension crisis.

On the North Penn front, from my perspective, the insane five-year contract that this school board just gave its teachers union is irrelevant to Pennsbury. The president of the North Penn school board is a teacher and a union member.

It makes you wonder where North Penn is going to get the money to pay for that crazy contract. And how are they going to provide educational resources given the constraints of Act 1? The answer is, they have no idea. How scary is that?
By the way if the Pennsbury teachers union starts saying things like: "We can get a better deal in a neighboring school district," my reaction will be: "You’re absolutely correct. Please feel free to leave. Then we’ll deal with the hundreds of applicants for any vacancies, while you lay ruin to some other school district."

Can you imagine how this union game of "round robin" (comparing one school district to another) would work in the private sector? It would go like this. Employee: "Hey, Boss, I demand more money because you’re not paying me competitively enough." Manager: "Really? What forces of competition are you using, because I just received ten resumes from highly qualified candidates for your job today?" Employee: "My argument is simple. My neighbor, Bob, makes more money than me, and that’s not fair." Manager (after he had finished laughing): "Well maybe you should get Bob’s job then!"

School boards must stop buying into this irrational and socialist theory of competition. And school boards should stop being wimps. Paying a monopoly union not to strike is like paying a bank robber not to rob your bank.

As you have surely heard, the Pennsylvania School Employee Retirement System (PSERS) is a brewing crisis of unmitigated proportion. There is a massive unfunded liability about to lay ruin to taxpayers and school districts because PSERS contributions can be taken as an exception to the Act 1 index.

State lawmakers are the only ones who can fix this pension crisis. Here’s how. Get rid of the unfunded liability, and therefore, get rid of the problem. They can do it by voting to amend the Pennsylvania Constitution once before the end of the current legislative session, and again in the new legislative session in January, then the proposed constitutional amendment goes to voter referendum in May 2011.

Let the lawyers work out the precise wording but basically the amendment is to not fund the current liability to public employees. Instead, all public employees would have their pensions cashed out at today’s market value, and put into a privately managed 401(k)-style account, with defined contributions. The state gets out of the pension business altogether. Bingo, problem solved.

Now wait for the public sector unions to scream: "But you owe us the money. It was promised!" The response from taxpayers should be: "Life stinks, doesn’t it? Your employer dropped their contribution rates, and your pension fund took a major hit in the stock market that nobody is going to make up. Welcome to Planet Earth as the rest of us know it."

Oops look at me, upsetting the public sector unions again! I should probably just insult your intelligence like our state lawmakers do. You see, our state lawmakers are not going to enact this bold fix. That’s because far too many of them pander to public sector unions in exchange for campaign contributions.
Perhaps it is time to start looking at campaign finance reports to see which candidates are funded by contributions from public sector unions, before voting in November. This is surely preferable to allowing these politicians to kill your brain cells by talking about re-amortizing the debt and borrowing even more money.

Simon Campbell is a member of the Pennsbury School Board in Bucks County, and the founder of StopTeacherStrikes, Inc.