The Pennsylvania Public School Employees' Retirement System will hit schools across the state for higher employer pension contributions for the fiscal year beginning in July.

In an announcement late Friday, PSERS said school districts must contribute an additional $1.8 billion to the state fund, which has 279,000 active school workers and 194,000 retirees.

The increase amounts to a 12.36 percent surcharge on salaries of school employees for next year, compared with about 8 percent this year.

The extra money is needed because of growing numbers of retirees and because PSERS recently had weaker returns on pension-fund investments, which showed a 3.6 percent loss in the quarter ending Sept. 30.

Alan Van Noord, chief PSERS investment officer, said the investment fund suffered the drop because "market volatility escalated due to continuing European debt issues and lingering uncertainty in the U.S. economy."

PSERS said the combination of investment returns and current payments by schools, the state, and school employees was not keeping pace with expected payments for more and more retirees.

Many school districts, including Philadelphia's, are in dire financial shape and must raise taxes or cut other expenses.

PSERS' executive director, Jeffrey Clay, said the increase would have been much higher if the legislature had not passed a law to cap the hikes. He said Act 120 of 2010 set the increases "in predicable increments and allow advance notice to school employer" and state budget planners.

PSERS is the 16th-largest state-sponsored defined-benefit public pension fund in the nation.

On Sept. 30, PSERS had net assets of $47.4 billion.

More information on the employer contribution rate, including 30-year rate projections, is on PSERS' website at:

at 215-854-5831 or

Staff writer Joseph DiStefano contributed to this article.