DROP IN TEACHER PENSION LIABILITY TO SAVE NORTH SHORE $1.4 MILLION IN 2015-16
Original Post December 9, 2014 (updated December 12) -- In what is great news for both school districts and taxpayers, the New York State Teachers Retirement System announced in an administrative bulletin last month that the required contribution rate to the teacher pension system for school districts will be at least 23% less in 2015-16 than it is in the current school year.
For the North Shore School District, "the projected decrease in the TRS liability," said Assistant Superintendent for Business Olivia Buatsi, "is just about $1.4 million."
Currently, districts must contribute 17.53% of payroll to the system. In 2015-16, that rate will decline to 13 to 13.5% of payroll. For this school year, North Shore has budgeted $7,311,009 for TRS. Next year that figure will be much closer to $5,900,000.
Ms. Buatsi explained that in coming up with next year's projected savings, she applied a rate of 13.4% and took into consideration the projected payroll for all employees enrolled in TRS, including administrators and teaching assistants, as well as "the higher than usual number of lane changes that teachers have been granted since last school year." A "lane change" refers to the pay raise teachers receive when they reach certain levels of education such as "Masters Degree plus 60 credits."
Ms. Buatsi said the reduction "is welcome news which will help to lower the impact of other areas of the budget such as health insurance which continues to increase every year."
It is first time since the 2008-9 school year, that there has been a decrease in the rate and the lowest it has been since the 2012-13.
Just as the sharp increases in contribution rates in recent years were largely a result of the 2008-2009 stock market collapse, the decline in mandated TRS contributions can be attributed to the market’s rebound. The actuarial report, on which contribution rates are based, takes into consideration the previous five year’s pension fund investment performance, and with 2008-09 now no longer factored in, the contribution obligation for districts has begun to come down from levels that previously had not been seen since the mid 1980s (see chart to the right).
"Favorable investment returns over the last several years are the primary reason for the decrease in the rate," the administrative bulletin reads. "The one-year net rate of return on System assets for the fiscal year ending June 30, 2014 was 18.2%. The System’s five-year annualized rate of return now stands at 13.8%,a substantial increase over last year’s 5.2%."
The good news concerning the TRS liability comes three months after school districts learned that contribution rates for employees enrolled in the New York State Employees Retirement System (ERS), which includes nurses, business office staff, secretaries, custodians, monitors, aides,bus drivers, food service workers, and transportation office workers, would decline next year by nine percent - from 20.1% to 18.2% of payroll.
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