Posts tagged ‘public pensions’

July 18, 2014

New York railroad workers will finally contribute to their health insurance

by Grace

At the last minute a strike by Long Island Rail Road workers was averted when they agreed to begin contributing to their health insurance and pensions.

Travelers on the Long Island Rail Road were spared a debilitating midsummer strike on Thursday, when the railroad and its unions reached an agreement three days before a planned walkout….

The unions received raises of 17 percent over six and a half years. But following a national trend in which workers shoulder an increasing share of their health costs, the railroad employees will, for the first time, contribute a portion of their pay, 2 percent, toward their health coverage.

The union had earlier rejected a proposal requiring “employees to contribute 2 percent of regular pay toward health care costs and pensions”.  This seemed out of touch with the reality of what most of their riders have to deal with.

In the private sector, the average percent of health premium paid by employees is 16% for individual coverage and 27% for family coverage. 

A talk show host who is usually on the side of unions had scornfully remarked that replacement workers could easily be found for these plum jobs that consisted mainly of “punching tickets”.

The New York Post wrote that the average LIRR worker makes $87,182 annually. Moreover, a third of the unionized workers make over $100,000. They get free health care and two pensions, but still, they want more.

Related:  “Quick Links – Public pension problems round-up” (Cost of College)


Matt Flegenheimer, “L.I.R.R. Strike Is Averted After Cuomo Intervenes in Labor Talks”, New York Times, July 17, 2014.

Maria Vultaggio, “LIRR Strike 2014: Long Island Commuters And Conductors React To Possible Walkout”, International Business Times, July 14 2014.

December 6, 2013

Detroit bankruptcy ruling shows that public pension promises can be broken

by Grace

The Detroit court ruling that weakens public pension protections should be a wake-up call for taxpayers and government employees in other states.

DETROIT — In a ruling that could reverberate far beyond Detroit, a federal judge held on Tuesday that this battered city could formally enter bankruptcy and asserted that Detroit’s obligation to pay pensions in full was not untouchable.

The judge, Steven W. Rhodes, dealt a major blow to the widely held belief that state laws preserve public pensions, and his ruling is likely to resonate in Chicago, Los Angeles, Philadelphia and many other American cities where the rising cost of pensions has been crowding out spending for public schools, police departments and other services.

The judge made it clear that public employee pensions were not protected in a federal Chapter 9 bankruptcy, even though the Michigan Constitution expressly protects them. “Pension benefits are a contractual right and are not entitled to any heightened protection in a municipal bankruptcy,” he said.

In particular, the Detroit ruling could be a game changer for California municipal bankruptcy cases.

The ruling by Judge Steven W. Rhodes, who is presiding in Detroit’s bankruptcy case, that public pensions are not protected from cuts could alter the course of bankrupt cities like Stockton and San Bernardino, Calif., that had been operating under the assumption that pensions were untouchable.

Uncertainty looms for Detroit retirees.

Are retirees going to lose their pensions?
Maybe. Rhodes ruled Tuesday that pensions, like any contracts in bankruptcy, can be broken. But he also warned city officials that they’ll need to justify any deep cuts that could threaten the lives of retired workers. There are about 23,000 retirees and 9,000 city workers. Most of them receive pensions that are less than $20,000 annually. Michigan’s Attorney General Bill Schuette says he will continue to fight Rhodes’ assessment that pensions can be cut, since public pensions are protected in the state’s Constitution.

What about New York?

I’m unaware of any New York municipalities or school districts that are in danger of bankruptcy.  But with pension costs overpowering the ability of New York public schools to maintain student services and escalating 5,000% over the last decade in some towns, this latest development may diminish the perceived sanctity of guaranteed pension payouts.  In any case, it’s hard to see how taxpayers can continue to pay the skyrocketing pension costs that have been the norm in recent years.  We will have to wait to see how the pension crisis plays out in New York and other states.


May 8, 2013

Quick Links – Public pension problems round-up

by Grace


Our local public schools must cut student services to pay soaring pension costs.

The budget numbers tell the story:

  • Total school costs will increase 3.3% over last year.
  • Cost of teacher pensions alone will increase 42%.
  • Pension costs account for at least 75% of the total budget increase.*
  • To pay for the 42% increase in teacher pension costs, the school will cut teaching staff and increase class sizes.

Public schools throughout the state are in a similar situation.   “Retirement and insurance costs continue their relentless climb”, causing a nearby district to cut 30 jobs.  Another local school administrator explains their pension costs:

Almost 80 percent of the hike comes from a $3.5 million rise in state-mandated retirement expenses, Purvis said.

* Total employee benefits costs account for 96% of the total budget increase.



The New York property tax cap introduced two years ago includes a carve-out created to allow tax increases that pay for teacher pensions to be exempted from the cap.  As it turns out, this exemption has been the main reason for the average tax increase more than doubling above the 2% statutory base cap up to 4.6% .

The additional increase is driven entirely by a provision of the 2011 tax cap law that excludes a portion of increased employee pension costs from the limit on tax levy increases. Without the pension-related increase, the 2013-14 levy limit statewide would average 2.7 percent, including all other district-specific exclusions and allowances for voter-approved capital expenses and physical additions to the local tax base, along with factors such as growth in the tax base and net changes in the value of payment in lieu of tax (PILOT) agreements.

The pension exclusion hurts poor school districts the most because the calculation method especially affects communities with lower property values.

… the pension exclusion in the tax cap law effectively makes it easier for school districts to raise taxes on property owners who can least afford it.

… The pension provision—added at the insistence of Assembly Speaker Sheldon Silver—diminishes the protection the law was supposed to provide for some of the state’s poorest taxpayers.



A “pension-smoothing” provision was recently introduced in New York, allowing school districts to postpone full funding of pension liabilities.

Moody’s does not look favorably on this plan to kick the can down the road.

Moody’s Investors Services warned Monday that the state’s new pension-smoothing plan is “a stopgap with long-term risks” that could endanger the state’s pension fund and the credit of local governments.

The plan, part of the state budget approved last month, allows for local governments and schools to essentially pay a flat rate for pension costs over 12 years, avoiding the steep cost increases that the municipalities have faced.

Opening the door to future underfunding of pension liabilities

Moody’s says that the concern is the flat-rate payments could underfund the state’s roughly $150 billion pension fund, which provides benefits to 1 million retirees and current local and state workers. That could lead to higher costs for municipalities and schools in future years, the credit agency said.




 In Illinois, public pensions already gobbling up education funding

… Education funding is being strangled by the same python that is strangling the rest of state government’s finances: pension obligations….


 “The pension costs really are the Pacman that’s eating our budget,” Shirey said.

March 14, 2013

Even after recent reform, New York teacher pension costs will rise 37%

by Grace

A history of New York State public school pension reform:


Recent reform that saw the creation of Tier 6 is unlikely to offer taxpayers any relief for at least a decade.

Over time, lawmakers have passed legislation to reduce the cost of pensions to state and local governments and school districts. The avenue they have used to do this is to create additional “tiers”—levels of membership that carry different benefits and requirements. After the passage of Tier 5 in 2009, calls for pension reform persisted, and a new Tier 6 was enacted this year.

Gov. Cuomo has said that the recently enacted pension reform will save the state more than $80 billion over the next 30 years. However, according to the NYS Comptroller’s Office, the creation of Tier 6 will not significantly lower pension costs for schools in the immediate future to prevent the kinds of program cuts many districts face in the next few years.

This is because the new pension tier applies only to new employees hired after April 1, 2012. With school districts struggling to balance their budgets in this difficult economy, most are laying off staff rather than hiring new employees who would fall into the new tier.

Pension costs have continued to surge out of control, as I wrote last year.

… skyrocketing public pension costs are “the single biggest threat” to local schools’ ability to deliver educational  services for New York children.  In our local district, pension costs have risen more than 50% over the last two years and now account for 7.2% of the total budget, up from 5.1% in 2010-11.  This has meant ongoing cuts in student services as taxes are diverted to pay for pensions.  The trend is up, and by 2015 pension costs are expected to eat up 35 percent of property tax collections.

There is no relief in sight.  Teacher pension costs for the 2013-14 school year will rise 37%.


March 13, 2013

Quick Links – Washington State pension trouble; NYC high school grads need remedial help; teacher evaluations are ‘costly experiment’ …

by Grace

◊◊◊  Washington State’s public pension may be in trouble.

The problem, similar to that in other states, has to do with the way pension benefits are valued.

Public pensions such as Washington’s operate under special accounting rules, one of which allows them to assume a long-term rate of return on their investments. Most plans have picked a rate between 7 and 8 percent; all but one of Washington’s plans assume 7.9 percent.

That assumed return is significant, because another special rule lets public plans use it as their discount rate — something corporate pension plans were forced to abandon nearly two decades ago.

Critics such as Munnell and Biggs say this rule ignores the fact that pension benefits are effectively almost as guaranteed as state bonds. That, they say, means they should be valued similarly to bonds.

“The way to value a stream of promised benefits is with an interest rate that reflects the riskiness of the promised benefits themselves, not the expected returns,” Munnell said.

This story is being ‘repeated all across the nation’ according to Walter Russell Mead.

… It’s as well-written a summary of a pension crisis story as you’re likely to get, and this is a story that’s being repeated all across the nation. Then, if you haven’t already, have a look at how much you or your loved ones are relying on generous promises made by state bureaucrats to fund your retirement—and start asking some hard questions.

◊◊◊  Most NYC High School Grads Need Remedial Help Before Entering CUNY Community Colleges (CBS New York)

Officials told CBS 2′s Kramer that nearly 80 percent of those who graduate from city high schools arrived at City University’s community college system without having mastered the skills to do college-level work.

In sheer numbers it means that nearly 11,000 kids who got diplomas from city high schools needed remedial courses to re-learn the basics.

◊◊◊  New York teacher evaluations are a “’grand and costly experiment’ with limited benefits”.

N.Y. schools’ teacher-eval costs outpace federal grants

ALBANY — New York’s small-city, suburban and rural school districts expect to spend an average of $155,355 this year to implement the state’s new teacher and principal evaluation plans, a report Thursday from the state School Boards Association found.

The one-year costs outpace the four-year federal grant provided for funding the program by nearly $55,000, according to an analysis of 80 school districts outside the state’s “Big Five.”

“Our analysis … shows that the cost of this state initiative falls heavily on school districts,” said Timothy Kremer, the association’s executive director. “This seriously jeopardizes school districts’ ability to meet other state and federal requirements and properly serve students.”

The evaluation system is a requirement for receiving funds from President Barack Obama’s Race to the Top initiative. In 2010, New York was awarded $700 million in Race to the Top grants. About half of the funding will go to local districts over four years to implement the evaluation system and other initiatives.

◊◊◊  20,000 illegal aliens apply for college financial aid under California’s new Dream Act.

More than 20,000 college-bound students are seeking state financial aid for the first time under California’s new Dream Act laws that allow them to get the help despite their immigration status.

While far from a complete picture, that number is the best indicator yet of how many students hope to benefit from a pair of laws that could radically change the college experience for a generation of students whose parents brought them to the U.S. illegally when they were young — the same group that has taken center stage in the national immigration reform debate.

November 28, 2012

Quick Links – new Tulane scholarship; public pension costs rose 5,000% over ten years; principals are primary reason why teachers quit; and more

by Grace

»»»  New full-tuition scholarship at Tulane University

The new Paul Tulane Award will be awarded to 50 students, an addition to the previously existing Dean’s Honor Scholarships that go to approximately 75 students.  The introduction of this new scholarship means that about 8% of incoming Tulane students receive full-tuition aid each year.  This is in addition to their other awards, including the Community Service Scholarships that range from $5,000 to $15,000.

This year’s deadline for the Paul Tulane Award has already passed, but interested students should make a note for future years.

»»»  Out of control and unsustainable – Pension costs rose over 400% during same period that the number of employees declined 25% in one New York town.

The town of Eastchester is located in Westchester County.

Supervisor Anthony S. Colavita said the town has to tighten its belt to pay increasing pension contributions amid declining tax collections thanks to reduced assessments.

The count of full-time employees stands at 153, down 25 percent from the 203 employed when Colavita took office in 2004….

Colavita had tough words for the rising cost of pension contributions, which rose from $571,455 in the year he took office to $3.1 million in next year’s proposed budget. Costs rose from $2.6 million in this year’s budget, a 21 percent increase.

“If we only had to pay half of that, we would likely not have a tax increase,” Colavita said.

A decade ago, Eastchester paid just $63,223 in pension costs.

The increase in cost over the past decade has been almost 5,000%.  This problem is widespread, also affecting the nearby village of Bronxville as explained by Mayor Mary C. Martin.

To put in real numbers, the Village’s pension obligation alone has risen from $17,103 in 2001 to $1,057,015 in 2012, or an approximately 6,000% increase in just a decade.

In essence, our obligations to the State are escalating at an unsustainable pace, so alternative revenue sources must be found or fundamental services and personnel will have to be cut.

»»»  Principals are most important factor in teachers leaving the profession  

To find out what factors influence novice teachers’ decisions to leave the teaching profession, Peter Youngs, associate professor of educational policy at Michigan State University and Ben Pogodzinski of Wayne State University, working with two other colleagues at Michigan State, surveyed 184 beginning teachers of grades one through eight in eleven large school districts in Michigan and Indiana. Their study was recently published in Elementary School Journal.

The researchers found that the most important factor influencing commitment was the beginning teacher’s perception of how well the school principal worked with the teaching staff as a whole. This was a stronger factor than the adequacy of resources, the extent of a teacher’s administrative duties, the manageability of his or her workload, or the frequency of professional-development opportunities.
Why Do So Many Teachers Quit Their Jobs? Because They Hate Their Bosses ( The Atlantic)


»»»  Indiana’s school voucher program is being challenged in court on grounds that it benefits religious institutions.

Indiana Supreme Court justices heard arguments last week over the state’s school voucher program, also known as Choice Scholarships Program.

At stake: Whether it’s legal for the state to use public funds to help parents pay for sending their children to private schools — an overwhelming majority of which are religious affiliated.

The state contends tax money is not being used to fund religious institutions, that parents receiving the vouchers are free to send their children to any school. Opponents argue public schools are losing not only students, but the cash the state would spend on their schooling — it’s illegal because religious schools are the ones benefiting, a clear violation of separation of church and state and contrary to the Indiana Constitution.

It is the nation’s largest school voucher program, having grown to more than 9,000 students during its second year of operation.

If the state voucher program is found unconstitutional, what about college scholarship programs that “benefit” religious institutions.

In considering the law, “The problem for me is `the benefit of,”‘ said Indiana Chief Justice Brent Dickson, referring the wording of the state constitution, which precludes spending state funds for the benefit of religious institutions. Dickson and other justices repeatedly probed the nuances of that phrase’s meaning — including whether it applied to other government services or to state scholarships that help students attend church-affiliated universities like Notre Dame.

It’s probably too early to tell how the voucher school students are performing compared to public school students.

September 5, 2012

Quick Takes – College scholarships by race, UVA in-state quota, managing student loans, etc.

by Grace

—  The Distribution of Grants and Scholarships by Race  (Mark Kantrowitz,

This paper presents data concerning the distribution of grants and scholarships by race. It debunks the race myth, which claims that minority students receive more than their fair share of scholarships. The reality is that minority students are less likely to win private scholarships or receive merit-based institutional grants than Caucasian students. Among undergraduate students enrolled full-time/full-year in Bachelor’s degree programs at four-year colleges and universities, minority students represent about a third of applicants but slightly more than a quarter of private scholarship recipients. Caucasian students receive more than three-quarters (76%) of all institutional merit-based scholarship and grant funding, even though they represent less than two-thirds (62%) of the student population. Caucasian students are 40% more likely to win private scholarships than minority students.

(This paper has lots of data on college financial aid.)

—  In-state student quota at University of Virginia

The Commonwealth of Virginia mandates that 2/3 of the students at the University be Virginia residents.  Beyond that, there are no quotas with respect to regions, counties, or high schools.
The UVA Admission Blog

California has a system-wide cap of 10% for out-of-state undergraduate students, and the University of North Carolina limits out-of-state freshmen to 18 percent on each campus.


—  A Web Site That Aims to Help Manage Student Loans 

A new Web site called aims to help current students and graduates manage their financial aid and loans with less confusion. The site allows users to access federal loans and grants, but will be expanded to include private loans in about a month. (Parents can also register to see information about PLUS loans taken out on behalf of their children.)
(The New York Times)

—  New York State pension costs ‘will rise 10.6% for state, local governments‘.

ALBANY — Public pension costs are again set to rise in the next fiscal year, with both the state and local governments facing an average increase of 10.6 percent, according to figures released Friday.

Starting April 1, the state, counties and municipalities will contribute an average of 20.9 percent of most employees’ salaries into the state’s pension system, state Comptroller Thomas DiNapoli said. The contribution rate is 18.9 percent.

—  ‘Average people think the road to riches is paved with formal education. Rich people believe in acquiring specific knowledge.’

“Many world-class performers have little formal education, and have amassed their wealth through the acquisition and subsequent sale of specific knowledge,” he writes.
“Meanwhile, the masses are convinced that master’s degrees and doctorates are the way to wealth, mostly because they are trapped in the linear line of thought that holds them back from higher levels of consciousness…The wealthy aren’t interested in the means, only the end.”
From Steve Siebold, author of “How Rich People Think.”

21 Ways Rich People Think Differently (Business Insider)

Another one:

Average people would rather be entertained than educated. Rich people would rather be educated than entertained.

September 7, 2011

New York public schools face a 29% increase in pension costs

by Grace

School districts are being socked with a 29 percent increase in their pension costs this school year.

The increase means schools will pay 11.11 percent of their payroll toward retirement costs in 2012, up from 8.62 percent in the prior school year, which ended June 30, the teachers’ retirement system announced this week. It’s the first double-digit rate in 22 years….

School officials said growing pension costs were equal to the total increase in school spending this year, up about 1.3 percent. The increase caused homeowners’ tax levies to grow on average about 3.4 percent this year.

This is not new information  – I learned about this last spring when we voted on school budgets.  In my local school district, taxpayer-funded pension costs will increase about 37% over last year’s, representing more than 50% of the total budget increase.  Pension/health/salary costs went up, while the total of all other school expenditures had to be cut as a way to keep the total budget increase to a manageable 3.9% that translates into an estimated 7% tax levy increase.

The pension expense comes as schools in July 2012 will have to abide by a property-tax cap.  The cap will limit tax increases to 2 percent a year or the rate of inflation, whichever is lower….

Pension costs are expected to grow further. In a memo to schools this month, the New York State Teachers’ Retirement System said it expects next year’s costs to exceed this year’s rate. It won’t have those estimates until November….

The Empire Center For New York State Policy, a conservative think tank, estimated in a report last year that taxpayer-funded contributions to the teachers’ retirement system will more than quadruple over the next five years. The group estimated pension costs for state and local government workers would more than double over the same period.

“It’s something everybody has to get ready for,” said E.J. McMahon, the group’s senior fellow.

School boards should provide taxpayers with longer-term budget projections

Mahon questioned why the teachers’ retirement system doesn’t provide districts with long-term outlooks on pension costs.

“You have districts that are negotiating contracts for three or four years, so why not tell them?” McMahon said.

Cardillo said they give districts about 18 months’ notice and can’t project rates further because economic conditions could change.

Multi-year projections are the norm in the business sector, for good reason.  Most taxpayers understand that  “economic conditions could change” and deserve to have this type of critical information when voting on budget issues.  Chappaqua Central School District is one that does a good job offering five-year budget projections.

Also, New York urgently needs to rein in its “skyrocketing” public employee pension costs.

Related:  Passing the pension time bomb in New York State

You can read the entire article, which received 119 comments from readers, after the jump.

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