Teachers' pension costs to drop as much as 19%

ALBANY – School districts will again have their pension bills drop, this time by as much as 19 percent, the state’s Teachers’ Retirement System said.

The drop is welcomed news for school districts, and it will be the third year in a row that pension costs will decline from historical highs several years ago.

The Teachers' Retirement System's actuary on Thursday recommended the contribution rate for school districts during the 2017-18 fiscal year at 9.5 percent to 10.5 percent.

For the 2016-17 school year, the rate was set last summer at 11.72 percent of payroll.

"This will mark the third consecutive year of declining rates, attributable to generally favorable investment returns over the last several years," said John Cardillo, the spokesman for the fund.

The declining rates, though, come as the fund posted slim gains for the fiscal year that ended June 30.

The rate of return was 2.3 percent, Cardillo said, but he said the five-year annualized rate of return was 8.3 percent.

The fund last year lowered its assumed rate from 8 percent to 7.5 percent, as pension funds around the country lowered their lofty expectations.

The pension fund provides benefits for 426,000 active and retired teachers and staff. At $110 billion, it's one of the largest pension funds in the nation.

The average pension was about $41,000 last year in the system, while the average salary was about $60,000, a review in February by the Albany Bureau for the USA Today Network found.

The lowered rates will save districts about $300 million in the 2017-18 fiscal year, which starts July 1, according to the Empire Center, a fiscally conservative think tank.

Over the past two years, districts saved about $800 million, the group estimated.

"Suffice to say, you will not hear this number mentioned much when public-school advocates claim the property tax cap is starving them of resources," the group's president E.J. McMahon wrote, referring to districts' complaints about the tax cap limiting their revenue.

The rates hit 17.53 percent of payroll in the 2014-15 school year -- the highest since the mid-1980s.

At 9.5 percent, the rates would be the lowest in seven years.

While the lowered rates will be beneficial, districts still have concerns about their long-term finances -- even as the state has boosted state aid by an average of 6 percent in each of the last few years, according to the survey of superintendents released Monday.

The survey of 361 superintendents in August by the state Council of School Superintendents found 20 percent of them were optimism about their ability to adequately fund programs and services.

"Declining pension rates will help next year. But uncertainty over where those costs may go in the future is one of the top concerns," said Robert Lowry, the group's deputy director. "We know the contribution rate will go up someday."


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