NYS Retirement Plans - Conundrum

[Chris_Wendt]

The massive increases in both the NYTRS & NYERS pension fund contributions required from school districts in this state has another new layer of complication for those school districts.

The districts' contributions or payments, the parts that hit our school budget, are calculated roughly as follows:

• Actuarial calculation of lawfully required funding level of each fund (TRS, ERS)
  
• Comparison of actual funding level of each fund with the actuarially required funding levels
  
• Determination of the gross amount of underfunding of each fund
  
• Calculation of each school district's share of the underfunded amount(s) as a pro-rata share of the whole, expressed in terms of a percentage of each district's covered payroll (of people enrolled in the respective TRS or ERS fund).

Here's the conundrum. Obviously, the intent of the actuarial study and computations and the calculations of individual district's share of the underfunded burden is intended to get and to keep the TRS & ERS properly and lawfully minimally funded. But the magnitude of the increases of school districts' contributions to these funds, in conjunction with impending reductions in State Aid and expiration of the Federal ARRA supplement, is going to result in what will be significant reductions in force among most employee groups in most school districts.

Ergo sequitur, as districts lay-off employees, they reduce their total payroll, including their contributions to ERS & TRS (which are levied as percentages of total covered payroll). The result could be a death spiral: payroll goes down, payments to ERS & TRS go down proportionately; the funds do not capture the amount of additional funding lawfully required AND either as a direct result of, or in the face of staff reductions, more covered people will put in their pension papers and retire, further increasing the ERS/TRS funds' lawful funding requirements.

Thus, in subsequent years ERS & TRS will require even larger funding (contributions) increases from the school districts, driving further staff reductions in the schools to compensate, and so forth and so on.

There is very little that a school district can do about this; that is NOT to say there is NOTHING a school district can do about this conundrum. What does that mean?

Here are the only two options I can see for the Wantagh School District to consider:

• Keep a lid firmly on the top step salaries; this will remove an important incentive for teachers to remain working on the top step instead of retiring and collecting their pensions. When teachers remain on the top step, and the top step just keeps on getting higher and higher above $100,000, the actuarial load on the TRS increases, driving up future funding requirements.
  
• Restrain or curtail the growth of the salary schedule; the salary schedule already provides a very comfortable progression of salaries for all but the top-paid teachers. The higher the salary schedule raises every grade and step, the larger and larger future pension payments become, likewise increasing the actuarial load on the TRS, also driving up future funding requirements.

I sincerely hope the Mediator has been made aware of this conundrum and is able to weigh its implications in the context of demands to raise the teacher salary schedule.

This, too, is serious.

Chris Wendt