Pennsylvania State Education Association v. Public School Employees’ Retirement Board
No. 199 M.D. 2021
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
January 21, 2026
HONORABLE RENÉE COHN JUBELIRER, President Judge; HONORABLE STACY WALLACE, Judge; HONORABLE MARY HANNAH LEAVITT, Senior Judge
Submitted: August 8, 2025
In its March 21, 2024 decision, the Supreme Court reversed this Court’s July 21, 2022 Order, which sustained the POs challenging PSEA’s standing, dismissed
The only POs that remain following the Supreme Court’s decision are PSBA’s POs asserting that (1) PSEA does not have a private right of action to enforce Section 8327.1 of the Code, and (2) PSEA has failed to state a legally sufficient claim for relief. For the reasons that follow, we overrule both POs and direct PSERB to file an answer to the Amended Petition within 30 days.
I. BACKGROUND
In 2019, the General Assembly amended the Code by adding Section 8327.1, which states in relevant part:
(a) General rule.--A nonparticipating employer is liable to the [Public School Employees’ Retirement System (PSERS or System)] for withdrawal liability in the amount determined under subsection (c). A nonparticipating employer is an employer that is determined by [PSERB] to have ceased:
(1) covered operations under the [S]ystem; or
(2) to have an obligation to contribute under the [S]ystem for all or any of the employer’s school employees but continues covered operations.
(b) Determination.--An employer shall, within the time prescribed by [PSERB] in a written request, furnish such information as [PSERB] deems necessary to administer this section and to determine whether an employer is a nonparticipating employer. If [PSERB] determines that an employer is a nonparticipating employer, [PSERB] shall:
(1) determine the nonparticipation date;
(2) determine the amount of the employer’s withdrawal liability;
(3) notify the employer of the amount of the withdrawal liability; and
(4) collect the amount of the withdrawal liability.
24 Pa.C.S. § 8327.1(a), (b). Section 8327.1, which became effective on September 3, 2019,
was meant to remedy a problem that occurred when an employer withdrew employees from the [System], the multi-employer pension plan for employees of public schools. Previously, when an employer withdrew employees from that plan, it would leave behind unfunded liability for the vested but unpaid benefits that PSERS owed the former employees—a financial burden that would be shouldered by the other employers who remained in the System.
PSEA, 311 A.3d at 1020-21 (footnote omitted). As our Supreme Court explained:
Pa. State Educ. Ass‘n v. Pub. Sch. Empls.’ Ret. Bd., 311 A.3d 1017, 1021 (Pa. 2024)Section 8327.1 imposes “withdrawal liability” upon school district employers that PSERB determines to be “nonparticipating,” which include both those that cease “covered operations” under PSERS and those that withdraw some but not all of their employees from the System. Withdrawal liability is an added cost to a school district employer when it makes certain employment decisions that affect the funding of the System, shifting the pension costs onto the employer that makes the decision rather than the employers that remain in the System. Because withdrawal liability affects the bottom-line cost to the employer of withdrawing employees, however, it may affect the employer’s decision as to whether a contemplated employment decision is financially worthwhile in the first place.
Id. at 1021 (footnote omitted).
Thereafter, on March 5, 2021, PSERB adopted the Resolution at issue, which stated:
RESOLVED that [PSERB] . . . directs the . . . System [] staff to perform an outreach to relevant organizations to elicit input and feedback and to research and prepare a report for [PSERB] assessing the applicability of Section 8327.1 of the . . . Code to outsourcing scenarios prior to applying the provision of Section 8327.1 to such scenarios.
In the interim, no action will be taken by [the System] regarding withdrawal liability as it pertains to outsourcing until further policy is approved by [PSERB] and by legislation.
(Id. ¶ 13 & Ex. A (emphasis added).) In other words, the Resolution “stated [PSERB’s] intent not to apply Section 8327.1 to ‘outsourcing’ scenarios, i.e., subcontracting, until further notice.” PSEA, 311 A.3d at 1022 (emphasis added).
In its Amended Petition, filed in August 2021, PSEA asserts that “[u]nder Pennsylvania labor law, subcontracting the work of a bargaining unit is a mandatory subject of bargaining.” (Am. Pet. ¶ 16.) PSEA avers that school districts, contemplating subcontracting for economic reasons, commit unfair labor practices “if [they] do[] not clearly advise the union of the projected savings associated with the subcontract and provide the union with an opportunity to prevent the subcontracting by matching those savings.” (Id. ¶ 17.) PSEA avers that unless school district employers and unions representing school district employees know the amount of withdrawal liability that will be imposed when school districts remove members from the System due to subcontracting, “school districts and unions will not be able to fulfill their obligations under [the Public Employe Relations Act (PERA), Act of July 23, 1970, P.L. 563, as amended, 43 P.S. §§ 1101.201-1101.2301].” (Id. ¶ 18.) PSEA points to three of its local union affiliates that have been “aggrieved by [PSERB’s] lack of action on Section 8327.1” because
Specifically, PSEA asserts that the Pocono Mountain Education Support Professionals’ Association, PSEA/NEA, the Shikellamy Education Support Professionals’ Association, PSEA/NEA, and the Port Allegany Education Support Professionals’ Association, PSEA/NEA (collectively, Local Unions) were, or will be, harmed by PSERB’s refusal to apply Section 8327.1 to subcontracting scenarios. (Id. ¶¶ 15, 28, 38, 46.) PSEA asserts that each of these Local Unions has a collective bargaining agreement with their respective school districts, and in renegotiating those contracts, each school district’s board investigated subcontracting bargaining unit work, but without factoring in what its withdrawal liability would be. According to PSEA, the school boards ultimately voted to subcontract or outsource certain positions, or have proposed to do so, resulting in the furlough, or potential furlough, of employees. (Id. ¶¶ 20, 22-24, 30-32, 34, 40-41, 43.)2
Both PSERB and PSBA separately filed POs to the Amended Petition. In its POs, PSERB challenges PSEA’s standing to sue and asserts that PSEA’s claims based on the potential charter school conversion of Chester Upland are not ripe because the conversion may never occur. In its POs, PSBA asserts that PSEA lacks standing to sue, PSEA does not have a private right of action under Section 8327.1 of the Code, and PSEA fails to state a legally sufficient claim for relief.
On July 21, 2022, this Court sustained PSERB’s and PSBA’s POs challenging PSEA’s standing, dismissed the Amended Petition, and dismissed the remaining POs as moot. See Pa. State Educ. Ass‘n v. Pub. Sch. Empls.’ Ret. Bd., 311 A.3d 1017 (Pa. 2024) (Pa. Cmwlth. No. 199 M.D. 2021, filed July 21, 2022), slip op. at 18, rev’d, 311 A.3d 1017 (Pa. 2024).
[T]he Resolution is the cause of the harm that PSEA describes. Framed in the language of our standing jurisprudence, PSEA is “aggrieved” by the Resolution. PSEA’s interest in challenging the Resolution is “substantial” because it far exceeds the interest of the public at large in the correct application of Section 8327.1 [of the Code]. The ordinary citizen has little to no interest in the financial consequences of a school district’s decision to subcontract the bargaining unit work of its
employees, or whether the school district will be required to pay additional funds into PSERS as a result of that decision. PSEA and its affiliated unions, by contrast, are interested in the matter due to its impact upon the union’s negotiating position. PSEA’s interest is “direct” because, as established above, the Resolution is causally connected to the asserted harm to the union’s ability to effectively bargain over subcontracting decisions. The Resolution is the reason for the mismatch in the parties’ understandings of when Section 8327.1 applies. If PSEA’s view of the statute is correct, then school districts, relying upon the Resolution, are premising subcontracting decisions upon an inaccurate assessment of the potential cost-savings, placing the union in a materially inferior negotiating position. Finally, PSEA’s interest is “immediate” because the causal connection between the Resolution and the asserted harm is real and concrete, not “remote or speculative.” Indeed, according to PSEA’s factual averments (which must be accepted as true when considering preliminary objections)[,] the Resolution already has harmed local unions’ interests in negotiations over subcontracting decisions in the Pocono Mountain, Shikellamy, and Port Allegany school districts. These averments establish a substantial, direct, and immediate interest sufficient to warrant a request for the sort of remedy that a declaratory judgment action seeks—a clarification of the law to resolve a dispute between interested parties over its meaning. . . .
Pa. State Educ. Ass‘n v. Pub. Sch. Empls.’ Ret. Bd., 311 A.3d 1017, 1031 (Pa. 2024) (footnotes omitted). Therefore, the Supreme Court reversed our Court’s ruling as to PSEA’s standing and remanded the matter for our consideration of the remaining, previously dismissed POs. With respect to PSEA’s averments related to the charter school conversion of Chester Upland, the Supreme Court stated:
PSEA initially sought a declaration that Section 8327.1 [of the Code] applies to the conversion of a public school into a charter school, as well, but it has since abandoned that aspect of its action because the proposed charter school conversion that it cited is no longer under consideration. See PSEA’s Br. at 3 n.1 (noting that PSEA “is no longer seeking relief related to charter schools”).
Id. at 1022 n.8 (emphasis added).
A. Private Right of Action
First, PSBA asserts that PSEA has no private right of action under Section 8327.1 of the Code, and, therefore, this Court lacks jurisdiction over this action. Section 8327.1 provides that PSERB “shall” take certain steps to calculate and collect “withdrawal liability” from applicable employers in compliance with the Code. See
However, as PSEA correctly points out, PSEA is not asserting a claim under Section 8327.1 of the Code. (See PSEA’s Answer to PSBA’s POs ¶ 32 (“PSEA has not asserted any claims under Section 8327.1 of the Retirement Code.”).) Rather, PSEA seeks relief exclusively under the Declaratory Judgments Act, 42 Pa.C.S. §§ 7531-7541. (See Am. Pet. ¶¶ 56, 66.) Section 7533 of the Declaratory Judgments Act provides:
Any person interested under a deed, will, written contract, or other writings constituting a contract, or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise, may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise, and obtain a declaration of rights, status, or other legal relations thereunder.
42 Pa.C.S. § 7533 (emphasis added).
Here, PSEA alleges that its rights, and the rights of its members, are directly affected by Section 8327.1 of the Code and PSERB’s interpretation and lack of implementation thereof. PSEA asserts that “there is uncertainty as to the meaning of Section 8327.1 in the context of outsourcing,” as evidenced by PSERB’s statements in the Resolution. (PSEA’s Br. at 22 (italics in original).) PSEA seeks a declaration that “Section 8327.1 of the Code applies when participating school employers subcontract[]/outsource[] work to private actors, resulting in removal of public[ ]school employees from the System.” (Am. Pet. at 19.) In other words, PSEA seeks a determination from this Court regarding the construction of a statutory provision that affects its rights and the rights of its members. That is precisely the type of claim contemplated by Section 7533 of the Declaratory Judgments Act.
Therefore, because PSEA is not asserting a claim under Section 8327.1 of the Code, but rather under the Declaratory Judgments Act, we overrule PSBA’s PO.
B. Legal Sufficiency of Claim (Demurrer)
1. Applicable Legal Standards
A “‘demurrer is a preliminary objection to the legal sufficiency of a pleading and raises questions of law.’” Raynor v. D‘Annunzio, 243 A.3d 41, 52 (Pa. 2020) (citation omitted). To sustain a demurrer, this Court must conclude that “‘on the facts averred, the law says with certainty that no recovery is possible.’” Com. by Shapiro v. Golden Gate Nat‘l Senior Care LLC, 194 A.3d 1010, 1022 (Pa. 2018) (citation omitted). “‘Where a doubt exists as to whether a demurrer should be sustained, this doubt should be resolved in favor of overruling it.’” Id. (citation omitted). “When ruling on a demurrer, a court must confine its analysis to the [petition for review].” Torres v. Beard, 997 A.2d 1242, 1245 (Pa. Cmwlth. 2010). “Thus, the court may determine only whether, on the basis of the [petitioner’s] allegations, [the petitioner] possesses a cause of action recognized at law.” Fraternal Ord. of Police Lodge No. 5 by McNesby v. City of Philadelphia, 267 A.3d 531, 541 (Pa. Cmwlth. 2021) (en banc).
2. Demurrer to Count II6
With these principles in mind, we must determine whether Count II of the Amended Petition sets forth a legally sufficient claim for declaratory relief. In Count II, PSEA seeks a declaration that Section 8327.1 of the Code applies when public school districts outsource bargaining unit work to private entities, resulting in the removal of public school employees from the System. (Am. Pet. at 19.)7
The purpose of the Declaratory Judgments Act “is to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations, and [it] is to be liberally construed and administered.” 42 Pa.C.S. § 7541(a) (emphasis added). Declaratory relief is limited, however, by “certain justiciability concerns,” including that a petitioner “must allege an interest which is direct, substantial and immediate, and must demonstrate the existence of a real or actual controversy.” Off. of Governor v. Donahue, 98 A.3d 1223, 1229 (Pa. 2014). Hence, declaratory relief is appropriate only where the declaratory judgment, if granted, would resolve the actual controversy between the parties. See Eleven Eleven Pa., LLC v. State Bd. of Cosmetology, 169 A.3d 141, 145 (Pa. Cmwlth. 2017).
At issue here are the parties’ conflicting interpretations of Section 8327.1 of the Code, specifically as it applies to subcontracting or outsourcing. PSEA contends that “[a]t the very least, the meaning of Section 8327.1 of the Code is uncertain” and that “[b]y enacting the Resolution, [PSERB] signaled that it did not know whether to apply Section 8327.1 to [outsourcing] scenarios.” (PSEA’s Br. at 24.)
In that case, PSERS argued that the phrase “nonparticipating employer[]” in Section 8327.1 includes a closed charter school; the school district, on the other hand, argued that Section 8327.1 does not apply to a closed charter school. Like PSEA in this case, the school district “highlight[ed] that it [was] ‘not asserting a legal claim under Section 8327.1 [of the Code]’ but ‘[was] seeking a declaration under the [Declaratory Judgments Act] as to its legal status, application[,] and enforcement.’” Id., slip op. at 15 (citation omitted) (underlining in original). The school district also asserted “that [its] [p]etition [for review] raise[d] substantial questions concerning the scope, applicability, and constitutionality of Section 8327.1 of the [] Code, causing enough doubt that [PSERS’] preliminary objections should be overruled.” Id.
In concluding that the school district stated a legally sufficient claim for declaratory relief, we stated:
[T]he [Declaratory Judgments Act] is intended “to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations.” 42 Pa.C.S. § 7541(a). In accordance with that purpose, the [Declaratory Judgments Act] “is to be liberally construed and administered.” Id. Pursuant to the [Declaratory Judgments Act], “[a]ny person . . . whose rights, status, or other legal relations are affected by a statute[] . . . may have determined any question of construction or validity arising under the . . . statute[] . . . and obtain a declaration of rights, status, or other legal relations thereunder.” Id. § 7533.
Here, there is a present and substantial controversy as to whether Section 8327.1 of the [] Code applies to a closed charter school’s “liabilities and obligations” under the [Charter School Law] and whether PSERS’ interpretation of that provision (i.e., its claim to withdrawal liability) is consistent with constitutional and statutory limits. A declaration from this Court, either on statutory construction grounds asserted in Count I of the [p]etition [for review], or on constitutional grounds asserted in Counts II, III, and IV of the [p]etition [for review], would resolve that dispute and terminate the uncertainty surrounding entitlement to the disputed funds. Such relief cannot be obtained through any administrative remedy, and thus, this controversy falls squarely within the scope of the [Declaratory Judgments Act]. See 42 Pa.C.S. § 7541(a).
Id., slip op. at 16 (some alterations in original) (emphasis added). This Court further noted that PSERS’ demurrer “fail[ed] to attack the sufficiency of the [s]chool [d]istrict’s claims in relation to the [Declaratory Judgments Act]” and, instead, merely “present[ed] a legal defense, not a true demurrer.” Id. Consequently, because this Court was “not confident that the [s]chool [d]istrict [was] precluded from recovery, and PSERS’ preliminary objection [was] not a true demurrer to the sufficiency of the . . . declaratory judgment action,” we overruled the demurrer. Id., slip op. at 17 (emphasis added).
It is not clear and free from doubt that Section 8327.1 of the Code applies to outsourcing scenarios, as asserted by PSEA, or that it does not, as asserted by PSERB and PSBA. See Pa. State Lodge, Fraternal Ord. of Police v. Dep‘t of Conservation & Nat. Res., 909 A.2d 413, 416 (Pa. Cmwlth. 2006) (“[W]here any doubt exists as to whether the preliminary objections should be sustained, the doubt must be resolved in favor of overruling the preliminary objections.”). If granted, a declaratory judgment on this issue would meaningfully clarify how PSERB should calculate withdrawal liability for school districts that outsource bargaining unit work to private actors and would resolve the present controversy.
Accepting PSEA’s factual averments as true, and given the liberal construction this Court must give to the Declaratory Judgments Act, we conclude that Count II of the Amended Petition states a legally sufficient claim for declaratory relief. Therefore, we overrule PSBA’s PO in the nature of a demurrer to Count II.
Accordingly, we overrule PSBA’s PO asserting that PSEA has no private right of action under Section 8327.1 of the Code and overrule its PO asserting a demurrer to Count II of the Amended Complaint. We direct PSERB to file an answer to the Amended Petition within 30 days.
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RENÉE COHN JUBELIRER, President Judge
Judge Dumas did not participate in the decision in this case.
O R D E R
NOW, January 21, 2026, Intervenor Pennsylvania School Boards Association, Inc.’s Preliminary Objections to the Pennsylvania State Education Association’s (PSEA) Amended Petition for Review (Amended Petition) are hereby OVERRULED, and the Public School Employees’ Retirement Board (PSERB) is hereby DIRECTED to file an answer to the Amended Petition within 30 days. PSERB’s Preliminary Objection challenging the ripeness of PSEA’s claims relating to potential charter school conversions is hereby DISMISSED AS MOOT.
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RENÉE COHN JUBELIRER, President Judge