Monday, January 10, 2011

Teacher pension costs are "skyrocketing"

Some information from today's Journal News article:
  • Teacher pension costs are "skyrocketing".  In Henrick Hudson Schools the increase this coming year will be 38%, forcing the school to borrow funds.
  • The state is making steep cuts in state aid and federal stimulus money is "drying up".
  • Teachers enjoy guaranteed pensions while most taxpayers assume the risks in their retirement accounts.
  • The number of retired teachers receiving pension benefits under TRS has more than doubled over the last ten years.
Most local school districts could have to raise their tax levies by 1.5 percent to 3 percent next year simply to cover required payments to retirement systems for teachers and other employees.
The two main statewide pension funds saw their investments battered late in the last decade, and state law automatically requires school districts to pay higher rates to make up the difference.
"It couldn't happen at a worse time," said David Albert of the New York State School Boards Association. "We have one of the worst economic climates in history and, by the way, your pension costs are skyrocketing."
School districts are awaiting steep cuts in state aid. Federal stimulus money is drying up. Health- care costs continue to rise. And districts are coming to terms with the havoc that Gov. Andrew Cuomo's proposed 2 percent property-tax cap would unleash on all aspects of school budgeting as it has traditionally been done in New York.
Now districts, as they begin working on their 2011-12 budgets, have to explain to taxpayers why they may have to open their wallets wider to cover guaranteed pensions for teachers, administrators and other public employees.
"A lot of people don't have a defined pension anymore and understand that what happens in the stock market affects their 401(k) portfolio," Tarrytowns Schools Superintendent Howard Smith said. "But in New York, these funds are stable and the beneficiaries don't share any risk. It's all on the district, and we get our resources from the taxpayers."
Smith said his district's contributions to the funds would rise to $4.4 million next year from $3.1 million this year. The increase translates into a 2 percent jump in the tax levy.
"Salaries are negotiable," Smith said. "Pension costs are not."
He noted that the pension increase alone would eat up the entire proposed property-tax cap.
Each year, all districts outside New York City have to contribute a percentage of their payroll to the retirement systems. The rate is determined by how the pension funds' investments performed over a five-year period.
The state Teachers' Retirement System's net assets — money available to pay current and future benefits — stood at $76.8 billion at the end of fiscal 2010. But the fund lost $7.8 billion in 2008 and a whopping $21.5 billion in 2009 before rebounding with a $6.8 billion gain in 2010.
As a result of several years of losses, districts in the fall will have to contribute 8.62 percent of the payroll for future beneficiaries to the TRS fund - up from 6.19 percent last year.
The New York State and Local Employees' Retirement System, which covers other school employees, is increasing its contribution rate from 7.4 percent of payroll last year to 11.9 in 2011. But a new alternative allows school districts and municipalities to finance the increase over 10 years.
"We've worked very hard the last several years to reduce our budget increases, but there is only so much we can do when we have these increases in the retirement system and projected losses in state aid," Hendrick Hudson Schools Superintendent Daniel McCann said.
Hendrick Hudson's payment to the TRS will increase by 38 percent to $3.5 million. This jump translates into a 2.46 percent increase in the district's tax levy.
The district will finance its $358,000 increase toward the second fund.
"While borrowing isn't always the best strategy, in this context, it is," McCann said.
The Teachers' Retirement System has seen its number of active members — those who will receive future benefits — increase to 285,774 in 2010, from 195,194 in 1990. The number of people collecting benefits has climbed during the same period from 69,127 to 141,716.
Teachers, administrators and others contribute differently to their retirement fund depending on when they were hired.
The biggest groups of teachers, who became part of the pension system between 1976 and 2009, contribute 3 percent for their first 10 years of membership, then nothing thereafter.
In 2009, the state approved a new tier for public employees hired after Jan. 1, 2010, that, among other things, requires employees to contribute 3 percent for their careers.
Currently, retired teachers who served for 20 to 35 years receive an average annual benefit of $36,064.
Thomas DePrisco, a member of the Pearl River Board of Education and the Rockland Board of Cooperative Educational Services school board, insists that the state has to force midcareer teachers to contribute to their pension funds for their entire careers.
This was the case until it was changed a decade ago.
DePrisco, a former teacher and police officer, said he is not anti-public-employee.
"My question is why taxpayers have to pay more to replenish these funds when hundreds of thousands of teachers are not paying a dime into their pensions?" he said.
DePrisco said that ongoing contributions by teachers and others would save districts enough money to make a difference.
"Maybe it would save two teacher positions," he said. "I'm worried. The next few years will not be good for us."

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