DEVASTATING AND DISTRUPTIVE IMPACT STAVED OFF AGAIN
Following months of negotiating, the New York State legislature passed a deficit reduction plan that saves hundreds of millions of dollars in critical school funding. The legislation closes nearly $3 billion of the state’s budget gap. This is the second time this year that NYSSBA has worked to stave off a plan to cut education aid in the midst of the school year. Cutting aid after communities have approved district spending limits and implemented programs and services would have had drastic consequences. Prior to the passage of the deficit reduction plan, the legislature, led by Senate Finance Chairman Carl Kruger, conducted budget hearings, where NYSSBA and local school board associations provided compelling testimony about the impact of potential cuts and the need for increased local authority to weather the financial crisis. With vocal opposition from NYSSBA and member boards, the legislature rejected a call for mid-year cuts for the second time this year. The legislature achieved its goal of balancing the budget without new taxes or fees and without cutting education aid that would have taken money out of classrooms, depleted district reserves in a time of need and potentially raised property taxes.
Governor Paterson however, indicated he believes the cuts are insufficient to pay the state’s obligations through the end of the fiscal year. He again vowed to immediately “delay” education aid payments to schools this year and then ask the legislature to authorize reneging altogether when they reconvene next year. The governor claims authority for the delay based on the statutory need to certify that sufficient funds are on hand to disburse. He says that since the legislature did not agree to the final $500 million in cuts he requested, he cannot certify that sufficient funds are on hand to make the legally required school aid payment. In so doing, the governor apparently ignores the $1.6 billion in unrestricted funds available in the state’s “rainy day fund.” According to NYSSBA Governmental Relations Director David Little, this approach is “like telling your family they can’t eat because you won’t spend the vacation money.” If the governor moves forward with the delay, NYSSBA, along with NYSUT and several other statewide education organizations, intends to consider all available means of bringing a halt to that effort.
In his reaction to passage of the Deficit Reduction Plan, State Comptroller Thomas DiNapoli did not indicate support for Governor Paterson’s plan to “delay” payment of school aid. In fact, he indicated a need for vigilance, but not the drastic step of declaring that payments could not be made due to the lack of available funds. "We need to closely monitor revenues and spending to see if the DRP will get us through the end of the fiscal year. The State continues to face a significant gap heading into next year’s budget. Taxpayers deserve honest numbers and realistic budgets. Moving forward, we have to make sure they get just that.”
LEGISLATURE PASSES NYSSBA PRIORITY BILL
$48 BILLION IN PENSION SAVINGS LINKED TO TIER V
The state legislature also approved major reform of the state pension system, creating long term savings for school districts. The legislation is expected to save taxpayers $48.5 billion over the next 30 years ($17 billion for schools alone) by establishing a new Tier V of pension benefits for public employees, which will apply to all new hires after January 1, 2010. Enactment of Tier V has been a NYSSBA legislative priority for the past several years and emanated from the NYSSBA Task Force on Pension Reform.
Pension costs are a major expense for school districts, with increases in employer contribution rates expected to increase each year for the next several years as the system recoups losses from the recession. “Today’s legislation is an absolute necessity for putting our fiscal house on a sound footing. The Tier V reforms represent a major step forward to help bring pension costs under control,” said Democratic Conference Leader Senator John Sampson.
“Establishing a Tier V classification for incoming public employees will save New York billions of dollars and reduce costs to taxpayers while maintaining a quality workforce,” said Assembly Speaker Sheldon Silver. “This legislation sets the stage for long-term financial stability for the state and local governments. While we continue to face this economic downturn, the creation of a new public employee classification is vital to the state’s fiscal health.”
“We have long known about problems in our state pension system, and today we have acted to do something about it. By placing our pension system on a sustainable path, we are saving taxpayers billions of dollars” said Senate President Pro Tem Malcolm A. Smith.
The legislation establishes a Tier V plan for members of the New York State and Local Retirement System/Employees Retirement System (ERS) for non instructional school employees. The plan will:
· Limit the amount of overtime that can be used in calculating final average salary. The overtime ceiling would be $15,000 annually starting January 1, 2010, and would increase by 3% annually;
· Require ten years on the job to vest with the retirement system and an employee salary contribution rate of 3%;
· Increase the penalty for retirement before age 62 to a maximum of 38%; and
· Raise the minimum retirement age to 62.
The Tier V plan for the New York State Teachers’ Retirement System (TRS) will:
· Require ten years on the job to vest with the retirement system and implements an employee contribution rate of 3.5% of salary;
· Raise the minimum retirement age to 57 with thirty years on the job;
· Make permanent retiree health insurance protections that prohibit reducing benefits for retirees unless they are also reduced for current employees. Prior to Tier V, legislation to provide this protection was enacted each year.
· Provides an early retirement incentive that allows teachers who are 55 years of age with 25 years of service to retire with full benefits if they elect to submit their retirement during a three month period next spring. This provides savings to school districts who have the option to replace retirees with employees hired at a lower rate of salary (and who will each contribute 3.5% of their salary to the pension system) or reduce staffing through attrition.
STATEMENT FROM GOVERNOR DAVID PATERSON
“Throughout this fiscal crisis, I have made clear we need to both reduce our spending and also fundamentally reform how we spend. This pension reform is a critical step in that process, and the savings will be achieved not only in State spending, but at the local level, which will help to reduce property taxes,” Governor Paterson said. “I applaud Senator Majority Conference Leader Sampson and Speaker Silver for joining me in achieving this long-overdue reform.”
Statement of NYSSBA Executive Director Timothy G. Kremer
School boards across New York applaud the State Legislature for rejecting midyear cuts to education, and creating a more cost effective pension plan for new employees in the state retirement systems.
Lawmakers in the Assembly and Senate realize the devastating impact that midyear cuts would have on our schools and children. As a result of a freeze in state operating aid this year, school boards have already laid off employees, left positions unfilled, and cut programs. Midyear state aid cuts on top of this could further erode opportunities for students and drive up local property taxes.
As school boards work to deliver education more efficiently, creation of a new Tier V will help ease the cost of providing school employees with a public pension. Lawmakers have helped stem the rising tide of school district retirement costs, which rose 56% on average from 2001 to 2006.
Nondiscretionary costs such as employee pensions can drive up school district budgets and, in turn, property taxes. The new Tier V will require school district employees to contribute to their pension for the duration of their employment, and will result in long-term savings. School districts outside of New York City stand to save nearly $17 million over 30 years as a result of this reform – more than any other government entity.
Despite these positive accomplishments, school boards face continued uncertainty over this year’s state aid as the governor insists on unilaterally withholding a portion of the December state aid payment to school districts. School boards demand the governor withdraw his plan to hold back state aid, which would result in a de facto midyear cut – despite the objections of the Legislature and general public.
Following months of negotiating, the New York State legislature passed a deficit reduction plan that saves hundreds of millions of dollars in critical school funding. The legislation closes nearly $3 billion of the state’s budget gap. This is the second time this year that NYSSBA has worked to stave off a plan to cut education aid in the midst of the school year. Cutting aid after communities have approved district spending limits and implemented programs and services would have had drastic consequences. Prior to the passage of the deficit reduction plan, the legislature, led by Senate Finance Chairman Carl Kruger, conducted budget hearings, where NYSSBA and local school board associations provided compelling testimony about the impact of potential cuts and the need for increased local authority to weather the financial crisis. With vocal opposition from NYSSBA and member boards, the legislature rejected a call for mid-year cuts for the second time this year. The legislature achieved its goal of balancing the budget without new taxes or fees and without cutting education aid that would have taken money out of classrooms, depleted district reserves in a time of need and potentially raised property taxes.
Governor Paterson however, indicated he believes the cuts are insufficient to pay the state’s obligations through the end of the fiscal year. He again vowed to immediately “delay” education aid payments to schools this year and then ask the legislature to authorize reneging altogether when they reconvene next year. The governor claims authority for the delay based on the statutory need to certify that sufficient funds are on hand to disburse. He says that since the legislature did not agree to the final $500 million in cuts he requested, he cannot certify that sufficient funds are on hand to make the legally required school aid payment. In so doing, the governor apparently ignores the $1.6 billion in unrestricted funds available in the state’s “rainy day fund.” According to NYSSBA Governmental Relations Director David Little, this approach is “like telling your family they can’t eat because you won’t spend the vacation money.” If the governor moves forward with the delay, NYSSBA, along with NYSUT and several other statewide education organizations, intends to consider all available means of bringing a halt to that effort.
In his reaction to passage of the Deficit Reduction Plan, State Comptroller Thomas DiNapoli did not indicate support for Governor Paterson’s plan to “delay” payment of school aid. In fact, he indicated a need for vigilance, but not the drastic step of declaring that payments could not be made due to the lack of available funds. "We need to closely monitor revenues and spending to see if the DRP will get us through the end of the fiscal year. The State continues to face a significant gap heading into next year’s budget. Taxpayers deserve honest numbers and realistic budgets. Moving forward, we have to make sure they get just that.”
LEGISLATURE PASSES NYSSBA PRIORITY BILL
$48 BILLION IN PENSION SAVINGS LINKED TO TIER V
The state legislature also approved major reform of the state pension system, creating long term savings for school districts. The legislation is expected to save taxpayers $48.5 billion over the next 30 years ($17 billion for schools alone) by establishing a new Tier V of pension benefits for public employees, which will apply to all new hires after January 1, 2010. Enactment of Tier V has been a NYSSBA legislative priority for the past several years and emanated from the NYSSBA Task Force on Pension Reform.
Pension costs are a major expense for school districts, with increases in employer contribution rates expected to increase each year for the next several years as the system recoups losses from the recession. “Today’s legislation is an absolute necessity for putting our fiscal house on a sound footing. The Tier V reforms represent a major step forward to help bring pension costs under control,” said Democratic Conference Leader Senator John Sampson.
“Establishing a Tier V classification for incoming public employees will save New York billions of dollars and reduce costs to taxpayers while maintaining a quality workforce,” said Assembly Speaker Sheldon Silver. “This legislation sets the stage for long-term financial stability for the state and local governments. While we continue to face this economic downturn, the creation of a new public employee classification is vital to the state’s fiscal health.”
“We have long known about problems in our state pension system, and today we have acted to do something about it. By placing our pension system on a sustainable path, we are saving taxpayers billions of dollars” said Senate President Pro Tem Malcolm A. Smith.
The legislation establishes a Tier V plan for members of the New York State and Local Retirement System/Employees Retirement System (ERS) for non instructional school employees. The plan will:
· Limit the amount of overtime that can be used in calculating final average salary. The overtime ceiling would be $15,000 annually starting January 1, 2010, and would increase by 3% annually;
· Require ten years on the job to vest with the retirement system and an employee salary contribution rate of 3%;
· Increase the penalty for retirement before age 62 to a maximum of 38%; and
· Raise the minimum retirement age to 62.
The Tier V plan for the New York State Teachers’ Retirement System (TRS) will:
· Require ten years on the job to vest with the retirement system and implements an employee contribution rate of 3.5% of salary;
· Raise the minimum retirement age to 57 with thirty years on the job;
· Make permanent retiree health insurance protections that prohibit reducing benefits for retirees unless they are also reduced for current employees. Prior to Tier V, legislation to provide this protection was enacted each year.
· Provides an early retirement incentive that allows teachers who are 55 years of age with 25 years of service to retire with full benefits if they elect to submit their retirement during a three month period next spring. This provides savings to school districts who have the option to replace retirees with employees hired at a lower rate of salary (and who will each contribute 3.5% of their salary to the pension system) or reduce staffing through attrition.
STATEMENT FROM GOVERNOR DAVID PATERSON
“Throughout this fiscal crisis, I have made clear we need to both reduce our spending and also fundamentally reform how we spend. This pension reform is a critical step in that process, and the savings will be achieved not only in State spending, but at the local level, which will help to reduce property taxes,” Governor Paterson said. “I applaud Senator Majority Conference Leader Sampson and Speaker Silver for joining me in achieving this long-overdue reform.”
Statement of NYSSBA Executive Director Timothy G. Kremer
School boards across New York applaud the State Legislature for rejecting midyear cuts to education, and creating a more cost effective pension plan for new employees in the state retirement systems.
Lawmakers in the Assembly and Senate realize the devastating impact that midyear cuts would have on our schools and children. As a result of a freeze in state operating aid this year, school boards have already laid off employees, left positions unfilled, and cut programs. Midyear state aid cuts on top of this could further erode opportunities for students and drive up local property taxes.
As school boards work to deliver education more efficiently, creation of a new Tier V will help ease the cost of providing school employees with a public pension. Lawmakers have helped stem the rising tide of school district retirement costs, which rose 56% on average from 2001 to 2006.
Nondiscretionary costs such as employee pensions can drive up school district budgets and, in turn, property taxes. The new Tier V will require school district employees to contribute to their pension for the duration of their employment, and will result in long-term savings. School districts outside of New York City stand to save nearly $17 million over 30 years as a result of this reform – more than any other government entity.
Despite these positive accomplishments, school boards face continued uncertainty over this year’s state aid as the governor insists on unilaterally withholding a portion of the December state aid payment to school districts. School boards demand the governor withdraw his plan to hold back state aid, which would result in a de facto midyear cut – despite the objections of the Legislature and general public.
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