Friday, 22 March 2013 00:00
This is the second in a series of articles from the Citizens Advisory Committee On Legislative Affairs (CACLA), in which we discuss the subject of unfunded mandates and how they impact the Manhasset Public School District. It is this committee’s goal to educate the community on this subject matter in particular, as it has significant current and long-term ramifications.
Manhasset School District’s Employees’ Pensions:
Another Unfunded Mandate
An unfunded mandate is a statute or regulation (coming from the state or federal government) that requires, in this case, a local public school district to fulfill the requirements of the mandate without adequate funding. The dollar expense of the unfunded mandate must come from the only revenue source a public school district has, i.e., the property taxes each resident is required to pay.
Before we get into the pension discussion, it is critical that you know the following: as a result of many unfunded mandates (the pension funding obligation being one of them), the Superintendent’s Preliminary Working Budget will exceed the permitted tax levy cap by $5,720,950. To reduce the budget by that amount, i.e., to stay within the permitted tax levy cap, we present examples of what potentially could be cut from our schools:
Increasing class size at the elementary school level in several cases up to a projected 30 in a class (savings of $1,400,000)
Reduction of 14 teachers at the secondary school, thus increasing class size and eliminating some course offerings (savings of $1,400,000)
Eliminating all before and after school programs and activities - no clubs, enrichment programs, theatre, music, etc. (savings of $350,000)
Eliminating all interscholastic athletics, middle school, JV, and Varsity (savings of $2,000,000)
Even with these significant cuts, an additional $570,000 of reductions would still be required to stay within the tax levy cap!
In this article, we will look at the impact the pension obligation contributions (currently the largest of the unfunded mandates) have on the Manhasset Public School District.
For the upcoming 2013/2014 school year, the school district’s pension contribution obligation will increase by approximately $2.2 million (totaling $8.17 million). This increase alone already exceeds Manhasset’s allowable tax levy cap. In fact, it is nearly twice the amount! Before any other expenses are taken into account, the district is forced to go for a vote that pierces the tax levy cap to fund the required pension contributions.
Unlike most private industry pension plans, the school district’s is a “Defined Benefit Plan.” This means it is calculated on a guaranteed payout to employees upon retirement. This amount must be paid regardless of gains or losses in the pension fund investments (e.g., regardless of the ups and downs in the markets). Basically, under New York State law, closing these gaps falls on the shoulders of the taxpayer.
What Can Be Done?
In recent times, most businesses have shifted to a 401K or “Defined Contribution Plan” which provides for sums to be set aside for retirement, but not a fixed amount. Upon retirement, employees are given their fund savings in a lump sum and importantly, the employer no longer has an obligation to maintain a specific level of funding through the employee’s remaining lifetime, thereby significantly reducing the financial burden to the employer.
A few years ago, proposals that might have resulted in meaningful changes in New York State employee pension plans, such as explained above, were watered down by the Legislature and only apply to new employees. Result? There is no meaningful relief in sight. Further, unlike a private company that has the right to change its pension plan, even as it pertains to retirees in certain circumstances, the “options” for reform of school district employee pension plans that provide immediate relief, are limited. Unless the Legislature enacts real pension reform, school districts will be required to continue to make these payments regardless of their fiscal situation.
Until the Legislature acts, it is our opinion that the State should exempt the total pension contribution obligation from the allowable tax levy cap. This will give school districts at least some needed relief from the ever increasing pension contribution obligations forced upon them by New York State. It won’t save the districts money, but will give the districts some leeway in budgeting without requiring a super-majority vote to pass the budget.
Through the Governor’s website, http://www.governor.ny.gov/, the New York State Assembly’s website, http://www.assembly.state.ny.us/, and the New York State Senate’s website, http://www.nysenate.gov/, you can contact the Governor and your representatives to express your views on pension benefit costs and if you so choose, propose our suggested mandate relief.
You will find all budget-related presentations (department by department and in total) on the school district’s website at: www.manhasset.k12.ny.us.
CACLA is a committee consisting of the following Manhasset residents: Paul A. Baumgarten, chairperson; Marianne Tomei, secretary; John Delaney, Tim Katsoulis, Thomas Kowalski, Christopher Nesterczuk, Chris Roberts, Mamie, Stathatos-Fulgieri.