Schools facing big uptick in pension costs

School districts across New York will be hit

School districts across New York will be hit with another big pension-cost increase in 2014 -- a continuing effect of the stock market crash of 2008 and the rising increase in retirement obligations. (Credit: iStock)

School districts across New York will be hit with another big pension-cost increase in 2014 -- a continuing effect of the stock market crash of 2008 and the rising increase in retirement obligations.

The state Teachers' Retirement System, which manages the pension fund for retired teachers and school administrators, notified districts that each will have to pay a rate of about 16 percent of every pension dollar paid for the 2013-14 fiscal year. That's up more than one-third from the current rate, 11.84 percent.

That will mean taxpayers will be on the hook for $600 million more in teacher-retirement costs for 2013-14, according to an analysis by the Empire Center for New York State Policy, an anti-tax group. The increase will be payable in the fall of 2014.


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The pension-cost hikes could put more districts at risk of breaching the state property-tax cap for that year, according to E.J. McMahon of the Empire Center. Under the cap, schools and local governments seeking to exceed the 2 percent cap on tax-levy increases must obtain a 60 percent "supermajority" from voters or a local governing board.

The huge hike was expected -- the Empire Center has been predicting for at least a year that the rate would hit 16 percent for 2013-14. The rate has been climbing steadily since 2009-10, when it was 6.19 percent.

Still, retirement system spokesman John Cardillo said the amount of the hike "could be" a surprise to some school districts, "but not the fact that it is going up."

The teachers' retirement fund, invested heavily in the stock market, lost about 20 percent of its value after the 2008 economic downturn, Cardillo said. It grew just 2.8 percent for the fiscal year ending June 30, 2012 -- well below the 8 percent retirement officials projected.

The new rates certainly will "drive up school personnel costs," said David Albert, spokesman for the New York State School Boards Association.

He acknowledged the rates will put pressure on districts that want to stay below the 2 percent levy-increase threshold for tax-cap purposes.

"Though districts will be able to exempt a percentage of the increase from their tax levy limit, no doubt many will be reluctant to do so in order to keep their tax levy increases in the 2 percent range," he said.

Twice in the last three years state leaders have enacted less lucrative pension systems -- but only for future employees. Albert said districts -- and taxpayers -- will wait a long time before seeing any cost benefits.

"It will take time -- likely decades -- before schools realize significant cost savings," Albert said.

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