Retirement costs continue NY school crunch
HOOSICK FALLS, N.Y. -- Last week’s budget address by Gov. Andrew Cuomo highlighted a proposed increase in state aid for public schools of $889 million, or a 4.4 percent year-over-year increase. The total amount is still less than schools received a few years ago, and individual school district results will vary.
"The 4 percent isn’t like everyone thinks it is," said Hoosick Falls Central School Superintendent Kenneth Facin, contesting the notion that most districts would see that increase.
The majority of Cuomo’s proposed new aid targets high-needs districts, while some is broken into competitive grants. And New York’s Gap Elimination Adjustment (GEA), a deficit-reducing measure that has eliminated millions in funding since 2010-11, remains in effect. "We’re further behind than before the (Campaign for Fiscal Equity) suit," said Facin, speaking to school board members on Thursday. That lengthy lawsuit established the Foundation Aid levels that the GEA has since cut.
"Rural schools have taken a bigger hit" than suburban/urban districts under the gap elimination, Facin continued. "We’re working off of some antiquated formulas."
While Tuesday’s executive proposal made good on previous pledges related to the bottom line of what the state is expected to provide for public grade school education, lack of significant reform will mean local school districts continue to face steep shortfalls. "I’m not happy," said Cambridge Central School Superintendent Vincent Canini.
"Our retirement costs are what’s killing us," said Canini by telephone Thursday. Spiking pension costs have been a main driver of recent budget increases at schools statewide, compounding cuts in aid and other rising expenses like health insurance.
Facin said there were still many unknowns with next year’s funding, including how $203 million in "one-time relief," according to Cuomo’s office in acknowledgement of ballooning pension contributions, will be disbursed. "There’s disparity in the educational system within public schools in the state of New York. ... There’s supposed to be equity," said Facin. "The equity seems to be getting more and more skewed."
Set by the New York State and Local Retirement System, schools are bracing for a dramatic rise in their employer contribution rates (ECR) for 2013-14. For non-teaching staff, the ECR is set to increase from 18.9 percent to 20.9 -- a roughly 10.5 percent year-to-year increase. The number is a percentage of payroll.
Meanwhile, the contribution rate for teaching staff (not finalized until February) is set to rise from 11.87 percent to between 15.5 and 16.5 percent -- between a 30 to 40 percent overall increase in retirement costs from one year prior. That jump is the largest going back to 1978-79, the earliest year available in an October 2012 administrative bulletin from the state teachers’ retirement system.
The rate is determined annually based on the pension system’s performance. A December 2012 comptroller’s office report blames "substantial financial market losses" in 2008 and 2009 for sharply rising benefit costs. The October bulletin writes that "poor returns in the global capital markets are the driving force behind recent rate increases."
"We anticipate future increases in the ECR," it reads in bold text. The teachers’ ECR rate has not reached the level it is expected to this year since 1987-88. Through the 1990s and 2000s, that rate never topped 10 percent, and hit a low of 0.36 percent in 2001-02 and 2002-03.
Recent pension plan changes in 2010 ("Tier 5") and 2012 ("Tier 6") will not significantly alter employer costs for years. Cuomo proposed a measure of relief Tuesday in the form of a "stable rate pension contribution option," which would allow local governments and schools to "lock in" a certain ECR rate in the short-term.
That option would "cap what we pay (now) and finance the rest," said Canini, characterizing the option as postponing the expense. "It’s all fluff. None of it is substance."
For real mandate relief, Facin pointed to overturning a 1992 action by then-Gov. Mario Cuomo that limited school employees’ contributions into their pensions to the first 10 years of their employment.
Compared to the current 2012-13 school year, a sampling of five nearby school districts in New York shows percentage increases in total operational aid (minus expense-driven aid like for building projects) of between 1.33 percent and 5.11 percent for 2013-14.
Preliminary school aid runs were released by the state budget office concurrently with last Tuesday’s address. While not final, the governor’s proposal is historically a good indicator of the state Legislature’s approved budget. Under the funding proposal, CCS would see a 1.33 percent increase, or $98,129. HFCS would see a 3.73 percent increase, or $322,631.
The president of the New York State United Teachers union, Richard Iannuzzi, said Cuomo’s proposal took "many steps in the right direction," but did not address inequities related to the gap elimination. "Community schools, full-day pre-kindergarten and more time in the classroom for our most at-risk students are all great ideas that will require a much greater investment of state resources," Iannuzzi’s written statement read.
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