HARRISBURG – The Executive Director and Board Chairman of the Public School Employees' Retirement System (PSERS) commended Gov. Tom Wolf for his proposed budget that would provide necessary funding to cover the Commonwealth’s share of PSERS employer obligations for the 2021-22 fiscal year, which begins July 1, 2021.
Gov. Wolf’s spending plan, released Wednesday, recommends that the General Assembly budget $2.734 billion for the full actuarially required funding that enables school employers to fulfill their pension obligations to their employees and the System. The Commonwealth’s portion is included as a line item in the Pennsylvania Department of Education’s budget. It acts as partial reimbursement to school districts and other local public education agencies whose current, retired, or vested-nonworking employees are PSERS members.
“We thank Gov. Wolf for his continued budgetary support of our mission,” said PSERS Executive Director Glen Grell. “His pledge of support is always welcome news and it is especially vital now, when school employers are coping with the financial burdens wrought by the COVID-19 pandemic.”
If the General Assembly approves the budgetary request, it would be the sixth consecutive year, the Governor, House and Senate worked in a bipartisan fashion to fully fund PSERS’ statutory obligation of administering and investing the pension. Those bipartisan efforts contrast to a roughly 15-year period in which the employers underfunded PSERS, which became a major catalyst for PSERS’ unfunded liability.
“I know the funding decisions are not simple or easy, but they are having a positive impact on PSERS,” Mr. Grell said.
As in years past, about three quarters of the funding would be used to pay down the System's existing unfunded liability. Due largely to full actuarial funding, over the past three fiscal year the System’s funded status has improved by nearly 3 percentage points to over 59%, and the System’s unfunded liability has fallen by $500 million. In addition, positive investment returns in 2020 allowed the System to recover its pandemic losses.
PSERS does not receive a General Fund appropriation to cover the System's administrative expenses. Rather, the administrative costs are paid from the System's investment proceeds after receiving approval from Gov. Wolf and the General Assembly. PSERS' recommended administrative budget for FY 2021/2022 is $52.9 million. (PSERS administrative expenses have consistently been lower than its public pension peer group as reported by CEM, an international, independent benchmarking firm.)
“Overseeing a pension fund is not an easy task and it has gotten harder as financial markets continue to move rapidly and fluidly during the pandemic,” said Board of Trustees Chairman Christopher Santa Maria. “That makes Gov. Wolf’s continued financial pledge so integral to keeping the System headed in the right direction toward becoming a fully funded System.”
About the Pennsylvania Public School Employees' Retirement System
PSERS, founded in 1917, began operations in 1919 to oversee a statewide defined benefit pension plan for public school employees. PSERS' role expanded upon the passage of Act 5 of 2017 to include oversight of two new hybrid options consisting of defined benefit and defined contribution (DC) components and a stand-alone DC plan. As of Sept. 30, 2020, PSERS had net assets of approximately $60 billion and a membership of about 256,000 active, 240,000 retired school employees and 26,000 vested inactive members.