Squeezed by ballooning pension costs, charters cut programs

humbling harbinger

February 24, 2010

Squeezed by ballooning pension costs, charters cut programs

by Kim Gittleson, at 2:43 pm

A Queens charter school that pays for pension costs directly out of its budget is cutting programs to afford pensions.

Stacey Gauthier at the Renaissance Charter School is worrying a lot these days — about money. This year she’s had to increase class sizes, cut the summer school program, and forgo hiring experienced teachers when an older teacher retires. Yet she still hasn’t cut enough to be able to afford the school’s rising pension costs, which have grown from $12,000 per teacher in 2004 to $21,000 per teacher this year.

Pension costs for city teachers have been rising steadily over the past decade, but for the most part the expenses have been hidden from individual schools, which rely on the city to cover all pension costs. Yet for a small number of charters schools like Renaissance that participate in the Teacher Retirement System (TRS) out of their own budgets, the ballooning price of a comfortable retirement has been acutely felt.

“We have another year to live,” Gauthier said. “We’re dipping into our savings now, which is okay, but if things don’t rebound, we won’t be financially viable.”

Although TRS costs have always been high relative to the private sector, their impact on charter school budgets has become especially burdensome since state lawmakers froze planned increases in charter school funding two years ago. (A breakdown of several charter schools’ pension and 401(k) payments is below the jump.)

The freeze made it harder for schools to pay their TRS contributions, which have increased by 10 percent since 2008. At a loss, schools said their pension payments are often coming at the expense of other school programs — a situation that the district schools could see themselves in if promised budget cuts are approved for next year.

“Our costs are growing astronomically,” said Vicki Zubovic, the managing director of development at the KIPP charter schools. “It’s becoming harder and harder to meet these needs.”

The TRS pension squeeze affects at least 12 charter schools in New York City. The rest offer some sort of 401(k) or 403(b) defined contribution plan in which employees contribute a portion of their salary to a fund and employers agree to match that amount up to a certain percentage.

The difference in cost between the two options is enormous.

The more generous public pension plan costs much more per student than a slimmer 401k retirement option.

According to an analysis using the fiscal audits from 2008-2009, on average, non-TRS schools contributed about 2 percent of all payroll expenses to their pension funds. TRS schools contributed around 14 percent of all payroll expenses to the TRS. This comes down to a difference of over $1,400 per student that TRS schools must spend on pensions that other charters are free to direct elsewhere.

Citywide, pensions cost on average $2,000 per pupil — a higher figure than charter schools face because district teachers are generally older and because of the way the TRS accounts for charter school pension costs. Overall, pensions make up $2.1 billion, or 10 percent, of the DOE’s total budget of $21 billion.

Most charter schools in the TRS joined because they are “conversion” schools that transformed into charters from traditional public schools — and as a result were required by the state to keep the same union benefits afforded district school teachers. But a handful of charter schools that belong to TRS opted into the plan on their own.

School leaders said they wanted to offer their employees the same benefits offered by district schools. There is simply no way that a 401(k) plan can offer the benefits that the TRS promises, such as free retiree health care and a guaranteed yearly pension that gets paid whether the market is down or not.

“We knew going in we were going to offer the TRS,” said Leonard Goldberg, the principal of Opportunity Charter School. “It’s hard for a teacher who has five, ten years in a system to try working in a charter school if the charter school doesn’t offer the same benefit.”

Goldberg said that TRS membership has helped Opportunity meet its goal of attracting and retaining experienced teachers. The plan is expensive, he said. But he added, “We believe at the moment it’s worth the investment.”

To compete, some charter schools that don’t participate with TRS have tried to make their 401(k) plans as lucrative as possible.

Take the plan at KIPP S.T.A.R., the only one of the four New York City KIPP schools that is not in the TRS. KIPP S.T.A.R. matches 50 percent of employee contributions up to the federal limit of $16,500 per year. In addition, the school offers employees a partially subsidized health care plan.

Despite all this, KIPP officials conceded that this plan, which is generous by most standards, still can’t compete with the TRS.

Not all unionized charter schools participate in TRS; two that offer 401(k) plans are Amber Charter School in Manhattan and Merrick Academy in Queens.

Even if the TRS schools stop thinking the plan is worth the investment, there’s nothing they can do: According to state law, once a school is in the TRS, it can never leave.

But that hasn’t stopped the schools from asking for relief. Several schools in the plan are pushing to get an increase in state funding to cover the costs. The UFT has proposed pension relief for charter schools that would require the Department Of Education to pay for the schools’ TRS costs. How that would work in practice has yet to be worked out.

But most schools in the plan agree that the simplest option — letting the charter schools opt out of the TRS — would not be a fair resolution.

“I think that there are some ridiculous parts of the pension, but we didn’t set that up,” said Gauthier of Renaissance. “The politicians, traditional public schools, they all have this benefit. Why are charter schools expected to be the sacrificial lambs?”

Here is a breakdown of charter schools’ pension plans and payments, as reported in their 2008-2009 audited financial statements. One note before reading: A small contribution to a school’s pension fund does not necessarily indicate poor policy on the part of the school. Because 401k/403b plans state that an employer must contribute to the plan only if an employee contributes, some schools contribute little to no money to their pension plans due to their employees’ decisions.

QueensParent

Well as has been pointed out on here before, this is not something regular public schools ever have to trouble themselves about it. Pensions and therefore the true cost of hiring a teacher never shows up in school budgets. If the teachers’ pension system loses money, the taxpayer just shovels more in like coal to a furnace, and the fire’s truly unquenchable. Charters have to take away money from kids to make up the difference; of course the public school system does the same thing, take away money from kids to pad teacher pensions, but it’s just not called that.
Ellen

And once again we are faced with this question: where are the sustainablity plans of the charter schools? Why would the Regents, CUNY or the DOE grant a charter to any school that has no sustainability plan. Banks don’t lend start-up money to entrepenuers based on a promise, but on a well thougth out plan.

This is the a Blanch DuBois funding program…..depending on the kindness of others. We all know how that one worked out.
http://www.nycsa.org/blog/ Peter Murphy

This is an outstanding analysis and should serve as admonishment to all charter schools that do not offer the guaranteed benefit, public pension: Don’t offer it. With charter schools on a fixed formula stream — frozen at 2008-09 levels — a guaranteed pension is a cost that is completely out of your control, which makes a school especially vulnerable in a funding freeze combined with a stagnate stock market. When the actuary at TRS or ERS sends the invoice, you must pay it. By contrast, charter schools that offer a defined contribution, 403(b)-style plan have a fixed, predictable cost which they can adjust as part of an affordable compensation package. And, the younger you are, the more valuable a defined contribution plan is anyway.
Douglas

Queens Parent: I don’t follow your logic. You seem to be leaving out the fact that the entire state of New York, and in NYC, the entire city, pays taxes that rise in this newly inflationary economy, so by what logic do students at a public school not also add — by virtue of their parents’ wages — to the costs of teacher pensions? Just because something is not a “line item” in a budget or a revenue and costs balance sheet, doesn’t mean it’s not there.

Can you explain? I understand that “students” pay for Charter schools, if that is what you are saying, but there’s a huge lacuna in your argument on the public school side. I would argue that over time, public schools cost more, because they are inefficient and non-competitive. Those kinds of “industries,” if you will, are always cost intensive, and drains on city and state money, because they can offer nothing more to add value to their performance or operation.
Unionized Charter Lady

What Stacey Gauthier and Peter Murphy (two peas in a pod) fail to mention here is that all charter schools receive money in their budget to pay for TRS. What both Gauthier and Murphy want is for teachers to forgive their family’s future so that those that run the school could increase their profit margin. Many charters take the funds given to them for TRS and set up a 401(k) or 403(b) defined contribution plan in which employees contribute a portion of their salary to a fund and employers agree to match that amount up to a certain percentage. These plans guarantee that you will be working for the rest of your life or start getting acclimated to the taste of cat food. Teachers that accept these plans instead of TRS also guarantee that their schools will profit in some cases hundreds of thousands of dollars. Clearly, Gauthier aspires to be like the other great entrepreneurs of education like Eva M. and pull in 300k+ salaries not only on the backs of the children she claims to be fighting for but on the backs of her teachers. She might claim this to be a false accusation citing her CSA affiliation. But, wouldn’t you opt out for the chance at a 300k lottery win? Not if you had any morals. Placing your staff’s future and retirement on the firing line clearly illustrates a lack of morality.
Nicholas Tishuk

Hi (anonymous) Unionized Charter Lady,

Nice to meet you, I’m a unionized charter guy. As the elected chapter rep for the Renaissance Charter School’s CSA local, I work Stacey and rest of my administrative colleagues working as administrators at the school. I’m afraid you are absolutely wrong on all the facts:

1) What Stacey Gauthier and Peter Murphy (two peas in a pod) fail to mention here is that all charter schools receive money in their budget to pay for TRS.

This is simply not true. Charter schools receive per-pupil allocations (approx $12,443 per student) from the State, in addition various federal monies (Title I, IDEA, etc) to run their programs. Each school’s Board of Trustees determines the various compensation and benefit plans. At schools like ours, the entire staff collectively bargains for these benefits via the UFT, DC37 and my own union, the CSA.

That being said, when your “freeze” charter school funding, unionized schools like ours see effective, actual operational funding cuts because our contractual obligations such as salary steps, health cost increases and, the big one, pensions are not tied to our funding, they’re tied to negociations between the unions and the DOE. The Renaissance Charter School saw a $200,000+ increase in our TRS/BERS pensions obligations with not one additional penny from the state. Where is that money coming from, you might ask? Slashed programs, reduced course offerings and higher class sizes.

2) What both Gauthier and Murphy want is for teachers to forgive their family’s future so that those that run the school could increase their profit margin. Many charters take the funds given to them for TRS and set up a 401(k) or 403(b) defined contribution plan in which employees contribute a portion of their salary to a fund and employers agree to match that amount up to a certain percentage.

The Renaissance Charter School does not have a profit-margin. As a non-profit educational charity (501c3), our funding goes directly to operating costs. We have no CMO, management company or external organization that profits off our work; we’re what folks in the old school refer to as a mom and pop” charter school.

As a public school, all of our Board meetings and Board subcommittee meetings fall under the Open Meetings Law, so you can find out yourself. What don’t you stop by our next Board meeting so that you can inform yourself on our particular school? The next public meeting of the Renaissance Charter School Board of Trustees will be held on Wednesday, March 3, 2010 at 7:00 pm in the school’s auditorium (35-59 81st Street Jackson Heights, NY 11372, 7 train to 82nd Street, call 718-803-0060 for any additional information)

3) These plans guarantee that you will be working for the rest of your life or start getting acclimated to the taste of cat food. Teachers that accept these plans instead of TRS also guarantee that their schools will profit in some cases hundreds of thousands of dollars.

All full-time employees at The Renaissance Charter School, from the school aides to the Principal, from the teachers to the paraprofessionals, participates in either TRS or BERS. You clearly do not understand collective bargaining. Charter School employees can chose to join unions and if they do, their collective bargaining agents advocate on their behalf.

4) Clearly, Gauthier aspires to be like the other great entrepreneurs of education like Eva M. and pull in 300k+ salaries not only on the backs of the children she claims to be fighting for but on the backs of her teachers.

If you spend 30 seconds with Stacey Gauthier, or bothered to ask of the hundreds of people who visit Renaissance Charter School every year to see what we do or who work with our school in any capacity, you would understand how ignorant this statement is. Stacey makes exactly the same salary as the principals who work in the Department of Education who have the same experience.

5) She might claim this to be a false accusation citing her CSA affiliation. But, wouldn’t you opt out for the chance at a 300k lottery win? Not if you had any morals.

For you to talk about the morals of a fine public educator such as Stacey Gauthier’s from an anonymous internet handle is laughable. Stacey gets paid fair wages (she gets about $137,000, exactly the same as our colleagues in the traditional public school system with a similar level of experience. Take a look at the CSA’s salary schedule and make your own determinations if those salaries are “moral.”

The Renaissance Charter School, out of its general operating budget, pay each employee’s salary (the schoolwide range is $45k to $137k), pension contributions (approximately 30% of salary, totaling more than $1,000,000 annually), health benefits ($4,675 or $12,117 per employee, depending on whether they have individual or family coverage), health and welfare (dental/eye and we receive a salary, between $937 to $1684 depending on which union plan you are in) and FICA/Med/Unemployment Insurance (about 10% of salary, combined). Top it off with the DC37 Education Fund to allow our school aides to receive additional training and education courses. This is what collective bargaining entails, on a school level.

6) Placing your staff’s future and retirement on the firing line clearly illustrates a lack of morality.

The only people who are placing the Renaissance Charter School staff’s future and retirement on the firing line are those who are advocating for charter school funding cuts and freezes in Albany. The immorality of this is simple: our employees receive salaries and benefits according to one place (collective bargaining) and we receiving funding from another source (legislative action through the budget). Why don’t you consider the morals of those who lobby in Albany against schools like ours? Like the 1500 parents on our waiting list (for ~50 seats), our 10 graduating classes of seniors, our hundreds of very happy students and families, and the surrounding community in Queens that support our school, we feel it is an absolute travesty that our school, and many others, have been caught in the political crossfire.

For anyone who is a unionist, realize that schools like the Renaissance Charter School and others who participate in the pensions, will be the canaries in the coal mine, the first to die in the attack on charters. If you’d like to support the unionization and pensionization of charter schools, you should be vigorously advocating for full funding parity for charter schools compared to traditional public schools (the gap is $300 to $3000 per pupil according to the IBO).

Nicholas Tishuk
Director of Programs and Accountability & CSA Chapter Rep
The Renaissance Charter School
35-59 81st Street Jackson Heights, NY 11372
(718) 803-0060 x206 teach11372 at gmail dot com
http://transfermypension.info Transfer My Pension

It makes sense for everyone with private pension funds to have them reviewed by an independent financial adviser to ensure that the charges are fair and the underlying investment performance is at least as good as the average performing funds.
Touch Love

Public Sector Unions are a CANCER on Society …. a bigger threat to America that all the terrorists combined !
http://www.renaissancecharterschool.org Stacey Gauthier

I participated in this very important research project and provided data for The Renaissance Charter School because due to a funding freeze on charter schools and a second one being proposed by the Governor in his budget, unionized charter schools that provide pensions, health benefits and contractually negotiated salaries are financially in jeopardy. The Teachers’ Retirement System currently costs employers (the City or the individual charter school) almost 30% of payroll. This cost is not sustainable without further interventions. Anyone who says otherwise is kidding him or herself. Tier 5 was a first step in addressing the issue on a systemic level. Please note that unlike my fellow “pea”, Peter Murphy, with whom I agree on many points, I believe charter school teachers, administrators, paraprofessionals, school aides, social workers and guidance counselors who work in our public charter schools deserve to have the benefits of a city or state pension if they want them. In fact, I find it problematic that charter school operators are forced to choose between having money for programming and compromising on pensions. We do not ask our elected officials, police, fire fighters, other municipal workers or teachers and staff in traditional public schools to forfeit these benefits. The real issue is that while pension costs are rising, had our charter funding formula not been frozen, we would have had the money to cover the increase. Additionally, the CSA, my union, has proposed to work toward a plan that would support charter schools whose budgets are less than traditional public schools and are dependent primarily on state aid that would provide relief from spikes in pension costs. The UFT has also proposed a relief plan whose details have yet to be released. I am glad that Kim did this extensive research and hopefully we will now begin a productive dialogue around how to fix the problem.
Touch Love

“Stacy”, I love how you dance around the problem with fancy buzzword but offering NOTHING concrete.

Here’s something concrete that won’t bankrupt taxpayers … your pension formula (not for PAST) but for FUTURE years of service for CURRENT (yes CURRENT) employees needs to be reduced by 1/3 to 1/2 …just to bring it in line with what similarly paid Private Sector taxpayers get when they retire.

Were tired of having you pick our pockets !
http://www.nycsa.org/blog/ Peter Murphy

At the risk of redundancy, my point in advising charter schools to not offer TRS or ERS–guaranteed benefit plans–is because charters are different from school districts and local governments which have the power to levy taxes to pay for unexpected cost increases or reductions in revenue from other sources (like state aid cuts). Once you offer them, you cannot change it. In lieu of public pensions, it behooves a charter school to fairly compensate all its employees accordingly. It is ludicrous to suggest that absent public pensions would result in having to eat “cat food” in retirement, unless it was a facetious point; how else to explain the majority of society that does not have a public pension – are they all eating cat food as retirees? On a serious point, the funding freeze by the state, brought to you by NYSUT and the UFT, is particularly unfair to charters in the TRS & ERS since it cripples their ability to meet those higher actuarial costs. The result will be having to cut elsewhere, including programs and teachers, which threatens the educational quality of the school. Finally, those of you commenting anonymously, have the courage of your convictions and identify yourselves, which may also cause you to avoid name-calling and malice in favor of a grown-up exchange of views.
Charter Friend

Peter Murphy-your intentions are about as transparent as Eva M. You are on the side of profit making scoundrels. You are not for children. You want to exploit education. You scapegoat teachers’ unions to hide your own agenda. 401k plans were originally intended for rich executives to skirt paying their taxes (like many of your friends). They were never intended to be retirement plans and they are still not. The fact that you intend on pushing this on the (generally) young charter school teacher, shows what a villian you truly are. “Their not thinking retirement now, so why not try to pull the wool over their eyes?” We will remain Anonymous until you allow people to post responses on the “chalkboard.” Who is hiding here? You are free to fire off your attacks but let none respond. When have you ever seen a “chalkboard?” How long were you in the classroom for?
http://www.tradebit.com/filedetail.php/107106706-hot-topics-that-convert-in-health-fitness Matthew Rein

Hm.. making money without a job has always really been extremely difficult; almost always I get some information and work from those. But they are really expensive! Trying to make money without any sort of job experience is even harder. Some ebooks is so useless, despite that this post surprisingly taught me a lot. A lot of Thanks!

Our Twitter Updates

RT @sarcasymptote: Just realized I will be starting the trig unit on valentines day. My valentine to my kids is 6 weeks of hell. 28 mins ago
” you don't want to come to class? Have a packet. You don't like your teacher? Have a packet” - @leoniehaimson 2 hrs ago
.@leonileoniehaimson brings letters from anonymous teachers with damning tales.of credit recovery: giving out CR ”packets” like skittles.. 2 hrs ago
At credit recovery town hall hosted by Regents. Testimony so far by principal, and 2 former teachers. Principal support; teachers critical 2 hrs ago
Our report about the city's decision to keep two schools open, complete w/ co-location worries & political speculation: http://t.co/RO59PMh1 2 hrs ago
More updates...

GothamSchools — daily independent reporting on NYC public schools

humbling harbinger

February 24, 2010

Squeezed by ballooning pension costs, charters cut programs

Tips, questions, feedback?

Follow GothamSchools

Feb. 10: You’re invited!

Recently Posted Jobs

Chalk It Up

Recent Comments

Events Calendar

RSS Feeds

Our Twitter Updates

Archives

Copyright Notice

February 2012
M	T	W	T	F	S	S
« Jan
		1	2	3	4	5
6	7	8	9	10	11	12
13	14	15	16	17	18	19
20	21	22	23	24	25	26
27	28	29