Teachers union gives big boost to pension-smoothing plan (UPDATED)

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As they fight Gov. Andrew Cuomo in court on the state’s property-tax cap, New York’s largest teachers union is backing his proposal plans to smooth pension costs for local governments and school districts, urging its members to ask their legislators to support it.

In an email Tuesday to members, New York State United Teachers Executive Vice President Andrew Pallotta said Cuomo’s a pension-smoothing plan is a “practical solution” to prevent short-term spikes in contribution rates. NYSUT members occupy three spots on the 10-member board that manages the New York State Teachers Retirement System, an $88 billion pension fund.

Cuomo, in his budget proposal, proposed a plan to allow local entities to lock in a pension rate for 25 years, essentially allowing them to pay less than the current rate now and more in the future. The plan would be optional.

The overseers of the state’s pension funds would have to sign off on the plan. State Comptroller Thomas DiNapoli, who is the sole trustee of the state’s main $150 billion fund, has said he’s studying the issue and hasn’t taken a position.

But the teachers fund is controlled by the 10-member board, which includes the three current NYSUT members and one retired teacher.

“If left unchecked, a cost increase of this size would devastate school districts and force further program cuts onto our student population,” Pallotta wrote. “Pension smoothing could be the solution.”

UPDATE: NYSUT spokesman Carl Korn points out the union supports a pension-smoothing plan, but not necessarily Cuomo’s plan. The union is “still studying the pros and cons” of Cuomo’s proposal, Korn said.

Cuomo’s plan remains the only smoothing option that has been proposed this year.

The teachers pension fund has taken a cautious approach as it studies Cuomo’s proposal, hiring an outside consultant to analyze the potential impact on the fund.

Other labor unions, however, have expressed concern with Cuomo’s plan. The state Civil Service Employees Association, New York’s largest public workers union, called Cuomo’s proposal a “a bait and switch scheme … that will allow public employers to underfund their pension obligations.”

Pallotta’s full letter — it kicks off with a joke — is after the jump.

What do James Bond, fine silk, and 20-year-old Scotch all have in common with the solution to temporary pension cost spikes?

One word. Smooth.

Take action now at the NYSUT Member Action Center to encourage lawmakers to allow school districts to “smooth” temporary pension cost spikes!

Pension smoothing is a practical solution to the short-term spikes in the required employer pension contribution rate that happen from time to time. In 2013-14, that spike could increase school district pension payments so dramatically that it could eat up the lion’s share of the $889 million increase in school aid included in the Executive Budget proposal.

If left unchecked, a cost increase of this size would devastate school districts and force further program cuts onto our student population. Pension smoothing could be the solution.

Take action now at the NYSUT Member Action Center to encourage lawmakers to allow school districts to “smooth” temporary pension cost spikes!

In much the same way that state and localities have utilized amortization to smooth out the temporary pension cost spike, school districts should be afforded the same financial tools to help mitigate their costs. That could save education jobs, alleviate program cuts and increase investment in education across the state.

Take action now at the NYSUT Member Action Center to encourage lawmakers to allow school districts to “smooth” temporary pension cost spikes!

In solidarity,

Andrew Pallotta
NYSUT Executive Vice President

P.S.: We’ve had enough of “slick” in Albany. It’s time for “smooth.” Please help!

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3 Comments

  1. Just let us underfund the pension fund for a little while…we promise to catch up later.

    Or, let us continue to use long-term borrowing (amortization) to pay today’s operational costs.

    Both of these tactics, if used by a consumer, would be the first signs of insolvency and poor fiscal management. What’s different? Government can make their own rules and redefine common sense terms.

    Pay your bills now. If you can’t afford to, cut your expenses. That is fiscal discipline. The simple fact is people took advantage of the good times and didn’t put enough away in savings for the bills that everyone knew were coming. Now they are trying to weasel out of it. And when has government ever repaid a promised debt in the future? There will always be a crisis to blame for extending these poor fiscal practices.

  2. sroamer, I’m with you on your “If you can’t afford to, cut your expenses” except I think we need to cut the expenses (payouts) in the plan rather than beef up the payments into it.