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deferred results (updated)

July 18, 2011

Pension changes could be enduring effect of merit pay pilot

by Philissa Cramer, at 5:55 pm

The full impact of the city’s short-lived experiment in teacher performance pay could still be felt.

The Department of Education confirmed today that it has ended a three-year-old school-wide bonus program that was called “transcendant” when it was introduced. The decision, spurred by a RAND Corporation report that was commissioned by the Department of Education’s private fundraising wing, follows a previous study that found no performance boost for participating schools. We reported in March that the city had quietly suspended the bonus program.

(Read the complete RAND report.)

The city will save money this year by not disbursing the bonuses, which it says cost $56 million over the life of the initiative. (The previous report, which the city did not commission, put the costs even higher, at $75 million.)

But the long-term effect could come from a pension sweetener introduced to get the teachers union on board with the controversial program. Then-UFT President Randi Weingarten hinged her support for the bonus program on a change in the law that would allow teachers to retire early, starting at 55 instead of 62, without taking a hit to their pensions.

The change put additional strain on a pension fund that already appears unable to support the pensions the city has promised. Although teachers now contribute more toward their pensions each year, the fund must still support teachers who retired before 2007 under the old rules. The new rule also increases the number of years that retirees are likely to draw pensions.

UPDATE: Some say the change could leave the city on the hook for millions of dollars. Larry Littlefield, a frequent critic of the union’s pension deals, wrote in the comments section today that the 2007 deal “will suck money out of the classroom at an increasing pace for decades.”

City officials said the 2007 change will actually earn the city money in the long run because teachers are contributing more toward their pensions each year and also contributing for their entire careers, instead of just a portion. A subsequent change to pension rules increased the annual contributions for new teachers entering the system.

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  • Marat

    Before Larry Littlefield hits his tedius one note act on this thread, I want to say that 25/55 was a good move by Randi Weingarten in protection of city teachers.

  • Larry Littlefield

    Here’s what’s most galling.  Those teachers recently retired or approaching retirement were promised a pension at age 62 after 30 years of work with a 3 percent contribution.

    Now, to fill the pension hole created by retroactive enhancements and past underfunding, Bloomberg and Cuomo want a retirement at age 65 with a 5.85% contribution for new hires — worse for future teachers to make up for what has been done.  Again.

    With the same deals for younger generations being proposed elsewhere for Social Security, Medicare, etc.

    Not only is this inequitable, it will do nothing to fill the current pension hole, because it will be some time before the city can afford new teachers if it is to meet its pension obligations.  

    And the only way to meet those obligations is for someone to pay in one dollar for each dollar going out for however long it takes for the pension system to recover. Because if you start selling income earning assets to pay benefits (losing the future income) in an underfunded pension plan, you enter a death spiral.

    The news isn’t all awful.   According to the latest report, the Teacher’s Retirement System had $2.7 billion put in during FY 2010 ($2.6 billion by taxpayers and the rest by workers) and paid out around $3 billion.  So another $300 million should have gone in even with no attempt to get out of the hole.  Much of the damage has already been done.

    But the amount paid out continues to rise as more retire and pensions are automatically adjusted upward — it was about $150 million higher than 2009 according to the previous report, with more to come.

    In addition, particularly if stock values readjust to fair value, actuaries might require contributions in excess of payouts to try to get out of the hole, which they have every right to do to get the pension system to a point where benefits can be paid even if the city goes bankrupt.

  • Marat

    Larry, what do you think, teachers shouldn’t be allowed to retire until they’re 75???

  • Larry Littlefield

    I think the two decade trend of richer retirement benefits for those who already had the best retirement benefits in the public sector, and richer pay for those who already had the richest pay in the private sector, all as a result of power and control of public and private institutions and all at the expense of the less powerful and future generations, is wrong.

    Whatever is right is right for everyone, now and in the future.  I’m sick of the screw the newbie, flee to Florida cycle.  And it goes far beyond NYC teachers, or even public employee pensions, to just about everything that has gone on for years.

  • guest

    You forgot how much was stolen from the pension plans.  That isn’t the fault of the teachers.  Also, when the stock market was up, the city took that extra money.

    You seem to also forget that almost all the tier 1 people have retired and are dying out. Most tier 2 people have retired or are close to it.  Tier 3 and 4 are starting to and their pensions are no where near Tier 1 (very generous) or Tier 2 (generous).  I think Liu showed that the in 6 to 8 years the peak will be passed because of this.

  • Larrylittlebrain

    you have no life

  • Vote NO!

    This  is  sad,…The  headline  should  be…  “Merit  Pay,  a  Central  Tenet  of  Education  Reform  has  Failed  in  NYC.”  But  GS  feels a  need  to somehow  try  and  shift  the  focus  from   another  failed  education  reform  scheme, to  deferred  compensation.  

  • Oldsneakers_2000

    Ms. Cramer, now you resort to citing the posters on this board in the main article. That is odd circular journalism.

  • Anonymous

    Each year the city makes an actuarial contribution, if the stock market soars and teacher attrition increases the city contribution drops. 60% of teachers are under 30, the 5-10 year attrtion rate is high, over the next few decades pension costs may decrease significantly, then again if we all live to 100 ..

    Never tie teacher pension costs to per pupil expenditures, if we dramatically cut pension costs the city could chose to reduce taxes or build more bike lanes.

    Budgets are strictly political documents and long term planning is the next election.

  • http://www.facebook.com/profile.php?id=711858292 Paul Rubin

    As more retire? More who? I’m 50. I might have worked til 60 or so in NYC but I have to get out of the insane asylum and I work in a great school. I can’t imagine how I’d feel hating where I work. But the point is, I look around and beyond the large batch Bloomberg and company just chased out with no raises, threats of layoffs to make class sizes worse, and the whole badly thought out reform movement, there’s barely anyone left to retire and my school is a relatively veteran school. Everyone’s in their 20′s, 30′s and early 40′s. Retirements are about to come to a crashing halt in NYC. When the economy turns around, be it 2 years, 4 years, whatever, we are going to find ourselves unable to attract new teachers while simultaneously having a limited number of retirements. The numbers you’re using are just not going to make sense on any side of the long term.

  • http://www.facebook.com/profile.php?id=711858292 Paul Rubin

    As more retire? More who? I’m 50. I might have worked til 60 or so in NYC but I have to get out of the insane asylum and I work in a great school. I can’t imagine how I’d feel hating where I work. But the point is, I look around and beyond the large batch Bloomberg and company just chased out with no raises, threats of layoffs to make class sizes worse, and the whole badly thought out reform movement, there’s barely anyone left to retire and my school is a relatively veteran school. Everyone’s in their 20′s, 30′s and early 40′s. Retirements are about to come to a crashing halt in NYC. When the economy turns around, be it 2 years, 4 years, whatever, we are going to find ourselves unable to attract new teachers while simultaneously having a limited number of retirements. The numbers you’re using are just not going to make sense on any side of the long term.

  • Marat

    Larry, I’m going to go out on a limb and venture to guess that you don’t go around spamming police, firefighter,sanitation, or any other municipal union forums with your particular views on how pensions are evil. You repeatedly focus on teachers. Why? I think it’s because it’s currently fashionable to pick on teachers and you’ve jumped on that bandwagon.

    School is out, you’re dismissed.

  • Marat

    Yeah, that’s a pretty weak move. Why are you quoting him, what makes him an authority on this?

  • ASTRAKA

    Larry, a few years back you described yourself this way…
    ” a career public servant with a variety of agencies working as a
    regional economist, budget analyst, and city planner. I am also the
    author of a comprehensive overview of comparative state and local taxes,
    spending, employment and pay, published on the internet by N.Y.U.’s
    Taub Urban Research Center at http://urban.nyu.edu/research/littlefield/index.html.”

    I have a few questions for you:

    1) Are you still a public servant? If not were you laid off or were you fired?
    2) I tried to read the paper you described above but I could not find it. Do you have a new reference (web address etc.)?
    3) Are you an actuary?
    4) Are you a statistician?

    As I wrote before, some of the points that you write about are worth exploring,
    but you claims are based on superficial analysis.
    Please do not think of this post as spam. I am trying to understand “where you are coming from” and whether you have an ulterior motive.

  • ASTRAKA

    By the way I have a great respect for you because you are using your real name. I, on the other hand, am hiding behind a screen name.

  • Philissa Cramer

    Not every post that appears on GothamSchools is a fully reported story. In the case of this issue, we did not want to write the same story that appeared in newspapers yesterday, especially because we already wrote it in March (linked in the post above). Instead, we chose to add value by raising a point that was absent from the other outlets’ reporting.

    We used to use something called “Margin Notes” to differentiate between fully reported stories and less exhaustive posts meant to add context and analysis. But they were a logistical challenge for us so we decided to test what would happen if that differentiation no longer occurred. We heard no complaints at the time. Still, bringing back some differentiation is in our long-term plan for the site. In the meantime, it’s worth noting that we do seek to take advantage of our unique ability to add context and analysis without fully re-reporting the work of others (and, in this case, our own work as well).

  • Larry Littlefield

    You’re way out on a limb.

    Generally I write on my own blog on Room Eight.  And mostly I write boring posts with lots of spreadsheets, particularly using boring old data from the U.S. Census Bureau.  Go back though the archives there and you’ll find a long series of posts on the finances of every sort of public service.

    Now assuming you work in the schools, I’m not going to criticize you or anyone else for not writing about education under your own name.  But I find it hard to see how writing under my own name, citing data and articles, and not engaging in personal attacks can be considered “spam.”  And no one has ever accused me of being fashionable before, I’ll tell you that.

  • Tiredofyou

    Larry When i started teaching 40 years ago a pension was something old people had so when they got old they would have some money to live on. I didnt take the job for the pension.I took the job to work with young people. You have never spent one moment in the classroom but you know how to use numbers to disrespect an honerable profession. I resent people who talk about what they dont know a thing about.I could see if you attacked all public workers but you dont. You have a different motive and at this time with all the teacher bashing going on you set yourself up for all that comes your way.You are a bully its just that you do it with numbers which can be very unfair as you know. You need the attention and love the fact that someone will answer no matter what you say.
    Listen the only thing that is wrong is the fact that you harp on things that bother only you. GET A LIFE Get A Hobby

  • Larry Littlefield

    1)      I left the public sector after running a Don Quixote campaign against the local state legislator, trying in part to get people to read the document you cited.  I was not laid off or fired.  I didn’t want to stick around to watch the public services I cared about gutted as the sold out future became the present.  I now work in the private sector, doing similar work.
     
    2)      The Taub Urban Research Center took the very large document down after several years.  But that was based on the 1997 Census of Governments.  You can find the data from the 2007 Census of Governments on my Room Eight blog.
     
    Employment starts here and continues for several posts.
     
    http://www.r8ny.com/blog/larry_littlefield/government_employment_the_2007_census_of_governments_is_out.html
     
    Finance starts here and continues for several posts.
     
    http://www.r8ny.com/blog/larry_littlefield/the_2007_census_of_governments_finance_data_background_and_state_data.html
     
    More to the point, the separate specific Census Bureau data on education for 2009 can be downloaded starting with this post.  It was little read, as something else happening at the time drowned it out on Room Eight.
     
    http://www.r8ny.com/blog/larry_littlefield/census_bureau_fy_2009_education_finance_data_not_anthony_weiner_or_sex.html
     
    3)      I am not an actuary, and had the statistical training one receives as part of a master’s degree in City Planning.  But I knew the likely consequences of unfunded retroactive pension enhancements, pension underfunding and debts from history and long term Census Bureau data.
     
    I’m coming from here
     
    http://www.nytimes.com/2002/02/12/nyregion/the-big-city-our-children-are-losers-ask-albany.html
     
    And ended up here, written right after the 2008 pension deal was signed by Spitzer.
     
    http://www.r8ny.com/blog/larry_littlefield/preparing_for_institutional_collapse.html
     
    As for bias, I started compiling data on public finance when asked to write several sections of the Annual Report on Social indicators back when I worked for city planning.  No one is paying me to do any of the linked analyses.  You are right to be skeptical.  My view on the subject of bias is here.
     
    http://www.r8ny.com/blog/larry_littlefield/nobody_s_gonna_pay_you_to_tell_the_truth.html
     

  • ASTRAKA

    Thank you  Larry,
    I will not write any comments on your claims, until I study your writings, and your analysis on your data. I was hoping that you were , in fact, an actuary or a statistician. 

  • Larry Littlefield

    If your interest is in pensions specifically, look at this post and spreadsheets, which includes data from the Governments Division of the Census Bureau for all 50 states and for selected areas from the early 1970s through 2008, the latest available.  Note that the data is for NYC and states as a whole, not for any one pension plan separately.  I’m one of a handful of people in the state that has experience working with this dataset, which is not timely but is at least objective.

    http://www.r8ny.com/blog/larry_littlefield/state_and_local_finance_and_the_future_part_i_pensions.html

  • Larry Littlefield

    If your interest is in pensions specifically, look at this post and spreadsheets, which includes data from the Governments Division of the Census Bureau for all 50 states and for selected areas from the early 1970s through 2008, the latest available.  Note that the data is for NYC and states as a whole, not for any one pension plan separately.  I’m one of a handful of people in the state that has experience working with this dataset, which is not timely but is at least objective.

    http://www.r8ny.com/blog/larry_littlefield/state_and_local_finance_and_the_future_part_i_pensions.html

  • Smith

    Larry was making these claims on other blogs before Gotham Schools even existed.  I’ve never seen the evidence to support his claim that 55/25 would cost the city money rather than save the city money, as Mayor Bloomberg claimed when the deal was signed.
     
    Larry, please show us the numbers.

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