Bill to let school districts borrow backed

Though a bill to allow school districts to borrow money to make pension payments appears dead on arrival, proponents hope Gov. Andrew M. Cuomo will weigh their arguments before taking out his pen.

The bill passed both houses of the State Legislature last week after a lengthy debate Friday in the Assembly. A Cuomo spokesman said the governor plans to veto it, but did not specify why.

Supporters argued it would allow school districts to smooth out spikes in pension costs caused by the recession while opponents said it's fiscally irresponsible to borrow and pay interest for operating expenses.

Sen. Jack Martins, (R-Mineola), who voted in favor of the bill, said borrowing for operating expenses is generally bad policy, but the two-year window to sell bonds under this legislation was a responsible way to deal with a temporary problem.

"We should give the school districts an opportunity to meet their pension obligations while at the same time giving them flexibility so the kids in school for these next two years aren't going to bear the brunt of the increased pension fund contribution required by the downturn in the economy," Martins said. Martins said the borrowing would be subject to the property tax cap enacted last week.

Pension funds across the country lost value during the recession, requiring greater contributions just when public employers could least afford it. The New York State Teachers' Retirement System lost $22.5 billion of its value from 2008 to 2009, shrinking to $72.5 billion during that time. Since then it's come back to $89 billion.

The teachers' pension fund smoothed out obligations by using a five-year average when calculating contribution rates, but recovery from that big drop still will take years. This year's contribution rate was 8.62 percent of teacher salaries and it is expected to rise to 11.11 percent next year.

For the most part, school districts can't participate in a program enacted last year to allow local governments to amortize increased contributions to the state pension fund over 10 years with interest because teachers contribute to a different fund. A key difference between the new legislation and last year's is that school districts would go to the bond market and sell taxable bonds and pay them off over 15 years.

The bill drew sharp criticism in some circles. Elizabeth Lynam, director of State Studies at the Citizens Budget Commission, a fiscal watchdog group, called the bill the "worst piece of business this session."

"New York's pension systems are comparatively well funded because we have paid the bills on time," Lynam said in an email. "School districts should not head down the slippery slope of underfunding these obligations."

One proponent of the bill, Georgia Asciutto, executive director of the Conference of Big Five School Districts, an organization that advocates on behalf of districts in Buffalo, New York City, Rochester, Syracuse and Yonkers, said the borrowing would be a stop gap measure to offset cuts in state education aid.

"This is just a mechanism to allow us to bridge into the next year when the state will be more flush and resources are expected to flow for school purposes," Asciutto said.