Critics Slam Teacher Pension System as Key Source of High Taxes

As voters throughout New York State will decide their school district’s 2015-16 budget next week, most school officials have found ways to maintain programs despite the tax cap and lack of mandate relief.

However, there are some grassroots groups and individual citizens who believe that the tax cap, which was signed into legislation nearly four years ago, hasn’t had nearly the impact its advocates had hoped for because of outdated practices and runaway unfunded mandates.

One state mandate in particular continues to sap millions from district coffers and taxpayers’ wallets every year.

In just a little more than a decade, employer contribution rates for the New York State Teachers Retirement System (TRS), the percentage of teachers’ salaries that districts must pay each year into the state pension, has risen from a microscopic 0.36 percent in 2002-03 to 17.53 percent this year.

That percentage will fall to 13.26 percent in 2015-16 due to a variety of factors that will save districts throughout the state hundreds of thousands, if not millions of dollars over the current year. However, it will also mark the fifth consecutive year where school systems will pay at least 11 percent of teacher’s salaries to pensions.

In 2014-15, the Byram Hills School District budgeted more than $5.8 million for TRS, nearly five times what it contributed a decade earlier. The Chappaqua School District set aside $9,013,000 for teachers’ pensions for this year, compared to $3,721,000 in 2006-07 and Pleasantville budgeted just over $4 million for 2014-15.

With salaries and benefits routinely accounting for roughly 70 percent of district budgets statewide and about two-thirds of homeowners’ property tax bills going to the schools, calls for pension reform continue to rise.

“The fact that they can’t do something about it is a lie,” said Laury Pandelakis, a former Long Island teacher and assistant principal who is a member of the Manhasset Proponents for School Accountability, one of many grassroots taxpayer advocate groups around the state. “They can do something–hold down salaries. That’s what’s behind the contributions to pensions.”

While salaries play a major part in determining employer contribution rates, performance of the financial markets and the number of retirees are also significant variables, said John Cardillo, a spokesman for the TRS. In 2013, there were just over 147,000 retirees collecting a pension, up about 12,000 from 2010.

Although the TRS, established in 1921, failed to meet its ambitious 8 percent annual returns helping to necessitate catch-up payments during the past decade, it holds an average return of 9.2 percent over the past 20 years, Cardillo said.

Chappaqua resident Judy McGrath, chair of the Town of New Castle’s Mandate Relief Committee, said common sense business practices that recognize modern economic challenges and are adhered to in the private sector still elude the state when it comes to managing public sector jobs and pensions.

McGrath is one of many who believe that a major salary driver has been the Triborough Amendment, an addition to the state’s Taylor Law more than 30 years ago that allows the terms of an expired contract to remain in effect. Triborough removes incentives for teachers unions to agree on new contracts, especially as districts look for concessions in tighter economic times, McGrath contended.

Bob O’Baldwin, who blogs about excessive school taxes and pensions, particularly in his native Long Island, said it has become routine for pensions for retired superintendents to top $200,000 a year. For most retirees, their pension is determined by the average of their three highest consecutive annual salaries, typically the final three years of their career.

In Nassau and Suffolk counties, which has retired superintendents accounting for 23 of the top 24 TRS pensions in the state, four retirees receive an annual benefit in excess of $300,000, led by former Commack Union Free School District superintendent James Feltman’s $325,854.36 pension, according to the nonpartisan Empire Center for Public Policy.

Nineteen retired Westchester superintendents also crack the top 100 in the state, led by former Ossining schools chief Phyllis Glassman’s $213,052.92 pension. The Empire Center reported that about 2,300 retirees receive at least $100,000 a year.

“Money for education has become money for educators,” O’Baldwin said. “Students, programs, services, buildings, taxpayers and the local New York economy are getting the short end of the stick.”

Despite some public angst over escalating pensions and district contributions, New York State United Teachers (NYSUT) union spokesman Carl Korn said that anger toward teachers who have earned their pensions is misplaced.

Although the high-profile six-figure pensions receive the publicity, the average current TRS pension is about $35,000 a year across the state, he said. In many instances older teachers and retirees had relinquished greater potential salary during their careers in exchange for greater benefits, Korn said.

Additionally more than 90 percent of the TRS pensions are being paid for by member contributions and return on investments, not taxpayers, he said.

But Korn said there were few complaints from the public in the late 1990s into the early 2000s, when the formulas dictated minimal district contributions. From 1997-98 through 2002-03, districts contributed a high of 1.43 percent of teachers’ salaries (1999-2000). It fell to as low as 0.36 percent (2001-02 and 2002-03).

“Where were these same people from 1997 to 2002 when the districts paid very little?” Korn said.

Revisions to TRS, such as the addition of Tier 6, which increases individual teachers’ contributions to as high as 6 percent and requires a later retirement age,  will likely take a generation to help the situation, critics argue.

Last year just 17,368 out of 270,039 TRS members belonged to Tier 6, according to statistics provided by the TRS. Coupled with the state legislature’s decision in 2000 to eliminate the 3 percent employee contribution for Tier 3 and 4 members after 10 years of service, districts have had to foot an increasing percentage of the contributions, McGrath said.

Last year, just over 230,000 current TRS members–about 85 percent–are in either Tier 3 or 4, the TRS reported.

However, those who want reform, whether they be part of taxpayer advocate groups or are more progressive, point out that there has yet to be the political will to make serious changes. Assemblyman Tom Abinanti (D-Pleasantville) said he introduced a measure three years ago that requires the state to foot the bill for pensions that exceed the 2 percent tax cap.

Despite getting state Sen. George Latimer to carry the bill in the Senate, his proposal has gone nowhere, Abinanti said.

David O’Halloran, a trustee in the Roudout Valley Central School District in Ulster County, said the lack of meaningful pension reform and mandate relief and the presence of the tax cap may eventually force more districts to take drastic action, such as mergers.

“At the end of the day, if the pensions fail to live up to projections, taxpayers are the ones who are forced to make them whole,” O’Halloran said.