A little pension relief for school districts
After Comptroller Tom DiNapoli, among others, expressed concern about it, Gov. Andrew Cuomo’s pension “smoothing” plan got scaled back considerably for municipal governments, and even more so for school districts that might want to stretch out their pension payment schedule so as to avoid steep tax hikes or deep spending cuts.
The new-and-improved plan, which the state Teachers’ Retirement System got around to approving this week, won’t save school districts that sign up for it nearly as much as the original one would have — contributions can be spread out over just seven years, rather than 25 — but for a cash-strapped district, seven years at a small discount is a little better than full-freight pay-as-you-go.
Indeed, districts that are on firm financial footing (and there seem to be fewer of them these days) should still avoid borrowing now to pay later for recurring obligations — especially rising ones. But for those districts whose only alternative is to make deep program cuts, this alternative — which allows annual payments of 14 percent of salaries for the first two years, gradually increasing to 18 percent for the last three — could be helpful. (Payments currently close to 12 percent of salaries are expected to rise to 16.5 percent next year.)
Cuomo’s original plan — an interest-free scheme requiring payments of only 12.5 percent of teacher salaries for nearly 25 years — may have been more lucrative, but like those eight-year new car loans, it went on for too long and was riskier. The modified plan also has a safety valve, allowing the Retirement System to raise payments in case of revenue shortfalls.
In decades, thanks to the reforms adopted last year, the cost of providing public worker pensions should start falling. A rising stock market, too, could obviate the need for large rate hikes, such as those required to offset losses from the stock market collapse of a few years ago. But many school districts are up against the wall now, and can’t afford to wait for those savings. With the state’s tax cap in place, they’ve already had to make cuts that impinge on their educational programs. So this reform should give the most pinched of these districts a little bit of breathing room