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The Pension Pain
The Pension Pain
The Pension Pain
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The Pension Pain

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  • 1. The Pension Pain“How the increasing of pension costshas been reconfiguring the reallocation of financial resources within the school districts”Optimization with an Impact (OpIm)P 646.770.3449|E-mail:schools052@gmail.com|www.optimizationwithanimpact.com|www.fiscalintelligence.org“OpIm relieves instructional leaders of non-instructional tasks so they can focus on student achievement and professionaldevelopment of the teaching staff.”1Many of our elected officials- whether directly or indirectly- have decided to ignore or de-emphasize the problemsthat our school districts face with the increasing pension costs throughout the nation. The costs keep increasingleading school districts to shift financial resources that would have gone to enhance the services that our childrenreceive towards the contribution to employees’ pensions. The painful reality is that prioritizing the resourcestowards pensions is a self-motivated agenda of adults looking out for themselves, which, in turn, disadvantage ourchildren from receiving the attention, resources, and education they deserve. A regarded union leader, AlbertShanker, is well-known for saying,“when children start paying union dues I start representing their interests.”This is a clear indication as to where we are heading. There is no doubt that we ought torespect the obligation oftaking care of our fellow citizens, but it is well overdue for our leaders, particularly the ones working in our schooldistricts, to acknowledge that their benefits are too generous and highly unsustainable in the long-run. The cost isincreasing so rapidly, that it can put small school districts close to the border of insolvency1. Most of the schooldistrict employees work hard to ensure our kids are learning and achieving progress, but there is a need foreveryone to work together to keep our school districts fiscally sound, both for the sake of the children and theteachers. It is a difficult balance to achieve but one that we need to work toward. For instance, 35 to 40 teachers-within the Bay Shore school district- recently received layoff notices and the school board president mentioned theskyrocketed pension costs as one of the tworeasons for the budget gap that has grown to $5 million.Let’s analyze for a moment the case of Plainview-Old Bethpage district. The district has 4,856 students, whichrepresents a decline of .86% of the number of students enrolled in the fiscal year 2012 (4,898); however, the schooldistrict’s spending budgetfor the same fiscal year increased by 2.29%. A legitimate question to ask is how much ofthat increase actually went to enhance instruction inside and outside the classroom as oppose to contributing to theemployee pension fund. The question is a valid one particularly in a district where enrollment is declining and,more significantly, when we know that the district faces a $3 million increase in its pension costs. The table belowshows that the liability for the school district has increased collectivelyby 72% when the variances of fiscal year2011 and 2012 are added together.Table I. I2012 2011 2010 2009 20081Yan, Ellen (2013, April 13). Dozens of Bay Shore teachers get layoff notices. Newsday.
  • 2. The Pension Pain“How the increasing of pension costshas been reconfiguring the reallocation of financial resources within the school districts”Optimization with an Impact (OpIm)P 646.770.3449|E-mail:schools052@gmail.com|www.optimizationwithanimpact.com|www.fiscalintelligence.org“OpIm relieves instructional leaders of non-instructional tasks so they can focus on student achievement and professionaldevelopment of the teaching staff.”2Variance 28% 44% -16% -10%Plainview-Old Bethpage 6,633,586 5,163,189 3,586,781 4,282,009 4,752,293The New York City Department Education is another case worth reviewing. According to a report released by theIndependent Budget Office, thereal, inflation-adjusted terms, per-pupil spending rose by 28 percent from 2002through 2009 but has grown by only 2 percent since then. That modest growth is entirely attributable to theincrease in pension costs. If those costs were removed, real spending per pupil would have declined in each ofthe last three years.This clearly corroborates the concern that I expressed when analyzing the Plainview-Old Bethpage case. The reportgoes on by saying that pension costs are now almost $2.9 billion a year, - an increase of $2.3 billion, or 370 percentsince 2002.The graph below illustrates and explain the magnitude of the problem that we all face in the short-term.This should not be deemed as a long-term problem, given that we are already living and feeling the impact of theredistribution of fiscal funds through the loss of jobs, negligence of our children, and substantial reduction ofextracurricular activities.050010001500200025003000NYC Pension Contributions
  • 3. The Pension Pain“How the increasing of pension costshas been reconfiguring the reallocation of financial resources within the school districts”Optimization with an Impact (OpIm)P 646.770.3449|E-mail:schools052@gmail.com|www.optimizationwithanimpact.com|www.fiscalintelligence.org“OpIm relieves instructional leaders of non-instructional tasks so they can focus on student achievement and professionaldevelopment of the teaching staff.”3Many of you may be asking yourself what is the driving force behind this financial issue. This matter is ignited bythe fact that the teachers’ retirement investment fund assumes a long-term return of 8% annually when on average ithas been generating a 3% return. The difference (in this particular case 5%) is the responsibility of the government.It is important for the constituents to start asking questions about this problem and begin to demand a clear andprecise answer from their elected officials as to how they are planning to tackle this growing issue.What is thecontingency plan? Governor Andrew Cuomo has already presented an idea as to how to go about addressing thisproblem which is referred to as the “smoothing option”. The jury is still out as to how effective his plan might be.See you next time,

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