LI libraries face soaring pension costs
Related mediaLI's $3B pension tab
Long Island's libraries will pay more than $53 million into the state pension system over the next two years -- more than twice the amount of the previous two years -- with some directors worried that rising pension costs will result in cuts in hours, materials and programming.
Some library directors across Long Island are concerned that choices of how to cut costs will become tougher as pension contributions continue to increase. So far, no local library has had to reduce operating hours to pay higher pension bills, said Jackie Thresher and Kevin Verbesey, who head the Nassau and Suffolk library systems respectively.
"I see that it has great potential to affect the direct services our patrons get and what they see in our programs, but there are a lot of things behind the scenes we can do, too," said Debra L. Engelhardt, director of the Huntington Public Library. "Everything needs to be looked at. Everything needs to be on the table."
Last month, as part of a continuing look at rising public pension costs on Long Island, Newsday reported that the region's taxpayers will pay nearly $3 billion in pension contributions over the next two years to cover retirees at all levels of village, town and county government, along with libraries and school districts. That figure represents a 69 percent increase over the previous two years. The two-year figure was used because that is as far as the current projections by the New York State comptroller's office go.
By law, the pension system must be fully funded and able to cover the retirements of all workers, but locally and statewide, many officials say these increases are unsustainable.
Newsday's examination of the region's libraries in terms of pension contributions shows how costs have increased sharply. Officials say the two-year pension costs have never been higher.
In 2010, the Middle Country Public Library paid $411,340; in 2013, it will pay $985,667 -- a 139.6 percent increase. In another example, the Sachem Public Library paid $306,379 in 2010; in 2013 it will pay $849,810 -- a 177.4 percent rise.
Some library directors say the bill for their required contributions is even higher than they anticipated during budget planning. At Smithtown Special Library District, director Robert Lusak budgeted $50,000 less than its 2012 pension contribution of $744,775, which is due in February. The 2013 bill is estimated at $882,208 -- a 141.7 percent boost compared with 2010.
"We're going to have to go back and . . . find a way to make the payments," Lusak said, noting the library may turn to its building repairs fund for help.
"We're going to have to come up with more creative ways that don't involve cutting services," he added. "But if the increases continue on a path like this, it could be more dire or . . . it could impact services."
Libraries try to cut costs
Many library directors are trying to rein in pension costs, which are based on total salaries, by focusing on reducing payroll expenses, offering early retirement incentives, cutting some part-timers' hours or dipping into their fund balances.
Every local library is facing similar choices. That's particularly difficult at a time when more patrons are using libraries -- a trend that often occurs in tough economic times.
"It's another one of many challenges that libraries face these days," said Verbesey, who heads the Suffolk Cooperative Library System, an umbrella organization over the Suffolk County libraries. "There are all kinds of pressures on public entities to do more with less."
Although pensions are funded primarily through investment income, when investments see huge losses, as they did in 2008 and '09, local public employers have to make up the difference. They then see their contribution -- determined as a percentage of their payrolls -- rise. And those increases are smoothed out to spread the financial pain over time, so it can take years for pension fund losses to be fully repaid by employer contributions.
Because the contribution increases follow market drops, 2013 will mark the third year of that five-year smoothing process. But some experts say pension contributions will remain significantly higher for as long as a decade after that.
Employer contributions may not fall back to a more "normal level" until 2023, said E.J. McMahon, a senior fellow at the Manhattan Institute, a conservative think tank. And even that level, McMahon noted, will be "much higher than what they're used to paying."
Other experts who follow the state pension system say that contribution levels could start to fall before 2023.
That's because for years employers paid almost nothing into the state pension system, as high investment returns allowed the pension fund to remain flush without employer contributions. In 2013, the contribution for the Employees' Retirement System -- one of three statewide systems and the one to which libraries contribute -- will stand at 18.9 percent of payroll.
"The costs may plateau at a high level or gradually subside to a normal level," McMahon said, citing a "norm" of 8 percent to 11 percent. "This is the real world cost of pensions that are guaranteed and generous."
Pension sizes vary
Library pension supporters note that many library retirees don't earn high pensions. Thresher said pensions for Nassau Library System main office retirees average $18,000 a year, depending on salaries and years of service. State records show more than 1,200 retirees of Long Island libraries receiving public pensions. At least 500 retired library employees Islandwide earn annual pensions of less than $10,000.
On the other end of the spectrum, according to Newsday's data, nine library retirees -- all former directors -- are paid more than $100,000 in pensions and another 25 retirees get in excess of $70,000.
About 73 Long Island libraries pay their pension contributions directly to the state comptroller's office. Twenty additional libraries, known as association libraries -- those set up by trustees operating under a will or deed of trust -- fall outside the state pension system altogether. Their employees don't participate and the libraries don't pay into it. In some cases, they offer private retirement plans.
Another 20 are affiliated with school districts and villages and they pay their contribution to those entities.
While the state announces its planned contribution rate -- the percentage of payroll to be paid -- more than a year in advance and provides guidance to employers that pay the state directly, some library directors said they weren't aware of those announcements and don't often receive information regarding their projected contributions until after they have done their budgeting.
"It is kind of a crystal ball game," said Paul Facchiano, director of the Central Islip Public Library. "We send our budget out to the public well before we really even get a ballpark figure from the state, so we have to guesstimate."
Facchiano said Central Islip's library can manage the increases for now. But future years are "going to dictate a lot more belt-tightening and a lot more conservative projecting," he added.
At Elmont Public Library, consulting business manager Frank Marino said he's already preparing for the increases he knows are coming.
"You have to pay it. You have no choice," Marino said, noting that the library's expected 2012 contribution, $171,000, makes up 7 percent of its budget. "Something has to give."
In Elmont's case, that may mean cuts in staff or staff hours, Marino said, but the library will try not to cut services.
Advocates are hoping it won't ever get to that point.
"We're hopeful that in a couple of years from now, as the market improves modestly . . . it'll get a little bit better," Verbesey said.