Wednesday, October 31, 2012

More Fiscal Problems for Public Schools?

The NY Torch today published an article announcing that school districts' bills for the Teachers' Retirement System (TRS) will increase from the current 11.84% of total teacher salaries to 15.5% - 16.5% for the 2013-14 school year.   According to the article, "Teacher pensions costs have nearly doubled since 2009-10."

School district taxpayers pay a percentage of teachers' salaries each year to the Teachers' Retirement System. NYS Comptroller DiNapoli is one of ten board members who oversee the $90 billion dollar teachers' retirement system.

NYSTRS’s 10-member Board is composed as follows:
• Three teacher members elected from the active membership.
• One retired member elected by a mail vote of all retired members.
• Two school administrators appointed by the Commissioner of Education.
• Two present or former school board members, experienced in the fields of finance and investment,
elected by the Board of Regents. At least one of these individuals must have experience as an
executive of an insurance company.
• One present or former bank executive elected by the Board of Regents.
• The State Comptroller or his/her designee.
(Board trustees are elected/appointed to three-year terms (except the Comptroller or his/her designee) and serve without compensation.)

DiNapoli's overestimating of the return on the $90 billion TRS fund (he anticipated 8% but it came in at 2.8%) will result in two things:

  1. Teacher pensions will be significantly underfunded.
  2. Taxpayers will have the pay the gap between what Mr. DiNapoli guessed would be the return on the $90 billion in the fund (8%) and the actual return (2.8%).  


Of course this will mean more problems for fiscally strapped public schools whose budgets are being stressed by state aid cuts since 2008, the 2% tax cap, and the significant costs associated with mandates (which few to no politicians want to address). In point of fact, Gov. Cuomo, despite forming a Mandate Relief Commission (that traveled all over NYS this past year), was quoted in a recent article as being annoyed by local governments and schools for pressing so hard for mandate relief. Some have speculated that he wants some schools to become insolvent so that NYS can take over, nullify contracts, and force mergers.

When will school districts stop making retirement promises, via contracts, that they cannot keep and that will ultimately undermine the entire retirement system?


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