Few Private Schools Affected by Social Security Law
Washington--Most private schools should not be adversely affected by changes in the federal Social Security system that require the mandatory participation of nonprofit organizations beginning next year.
However, the changes are causing severe problems in some isolated cases.
"Most of the private schools were participating already and see no problem with the new mandatory nature of the program," said a spokesman for the Council for American Private Education, a group that represents schools enrolling 80 percent of the nation's private-school students.
But one private-school official said, "I deeply resent the government forcing more people into [the Social Security program] to shore up a system that isn't working."
The Social Security Amendments of 1983, signed into law on April 20, require all current and future employees of nonprofit organizations--including schools that have nonprofit status under Section 501(c)(3) of the Internal Revenue Service Code--to participate in the federal Social Security program beginning Jan. 1, 1984.
Since 1950, nonprofit organizations have been allowed to participate in the program voluntarily, and could terminate their involvement two years after giving notice of their desire to do so, according to a Social Security Administration offi-cial. The amendents also prohibit nonprofit organizations from terminating their involvement in the future.
The changes mean that, beginning in 1984, each employee of a nonprofit institution will have to pay a social-security tax of 7 percent of the first $35,700 of his or her salary--an amount that must be matched by the employer.
In the case of some private schools, the timing of the change will cause major budgetary problems next year.
A spokesman for a private school for handicapped children in Virginia, who did not wish to be identified, said the changes will require a ''fantastic increase" in the school's 1983-84 budget, which has already been set, in effect, by the state.
The school, which serves 100 learning-disabled children in kindergarten through the 10th grade, is regulated by the state department of education, which must ensure that the school meets the standards for such schools outlined in P.L. 94-142, the Education for All Handicapped Children Act.
The amount of control over such schools varies from state to state, but in Virginia, the spokesman said, the state has the power to evaluate the schools' programs and to approve their rate of tuition increases--a process completed earlier this spring.
"The [Social Security] change came later in April," the spokesman said. "There is no provision for including the huge increase that will result from it in our costs "
The spokesman estimated that the change would increase the school's expenses, counting the amount both the employees and the school must pay, by as much as $60,000 next year.
The school's officials have asked the state to consider an "exception category" that would allow the school to absorb the additional expense by raising tuition above the amount already approved by the state.
"The only other option is to operate on a deficit budget," the spokesman said.
"We are a barebones, labor-intensive school, and we can't cut any further."
The spokesman added: "We have a tax-sheltered annuity system which is far better than the Social Security system to begin with. There is no way our people can con-tinue to contribute to both."
Newcomb Rice, director of the Brush Ranch School, a New Mexico boarding school for children with learning disabilities, is also opposed to the idea of mandatory participation.
The school serves 65 students with a staff of 40, and accepts no state or federal funds.
"All our staff elected not to participate in Social Security," Mr. Rice said. "I went ahead and paid them more money so they could set up their own ira's [Individual Retirement Accounts] or other retirement programs.
"Now the federal government comes along and says we have to participate," he said. "This will cost us $28,000 next year."
The result, Mr. Rice said, is that he is left with a high salary base and a new responsibility for Social Security matching payments.
"I'll have to raise tuition," he said.
Vol. 02, Issue 38