N.Y. Offers Pension-Smoothing Program to Schools

July 29, 2013 (PLANSPONSOR.com) – New York State is offering school districts a pension-smoothing program.

According to The Journal News, schools were able to begin reporting on July 1 if they would participate in the program, which is designed to help districts facing soaring pension costs. Participating school districts would be able to pay a flat rate employer pension contribution for seven years and then have five years to pay off the difference, with interest.

Some opted to include the savings from the smoothing plan into their 2013 to 2014 school budgets, which were approved by local voters in June. But schools have until June 30, 2014, to decide whether to lock into the fixed rates for the 2014 to 2015 school year.

The New York State Teachers’ Retirement System said the Yonkers school district has opted to participate in the program. This will mean a savings for the district of $8.8 million in the 2013 to 2014 year, School Superintendent Bernard Pierorazio said in the news report.

The Rochester school district also plans to participate in the program, which will defer $11.4 million in pension costs for the 2013 to 2014 year, Bill Ansbrow, the district’s chief financial officer, said in the news report. Ansbrow commented: “You can count on it. You can plan on it. You can budget for it. Instability by nature is not good for a financial institution, so the smoothing option provides more clarity and a sense of stability.”

The New York School Boards Association, which supports the program, conducted an informal poll of schools earlier this year and found few willing to sign on, David Albert, association spokesman, said in the news report. “It does provide an option for districts that really do want to reduce their pension costs immediately. At the end of the day, most districts didn’t want to defer the cost. They want to meet the expenses head on.”

Tompkins County, New York, said its district is opting out because its leaders believe it will cost more. “We have budgeted carefully and planned for the spike in the retirement, so we are prepared, and we don’t want to push out what we can just pay as we go along,” Emily Shipe, business manager of the Dryden schools, said.

Binghamton-area schools will not participate, with the district citing advice from its financial advisers that they don’t expect the contribution rate to continue rising, limiting the potential benefit. Buffalo-area schools do not plan to participate either, with district leaders saying they do not consider the program to be cost effective.

“In the absence of any real effort by state policymakers to provide significant mandate relief to school districts, this pension smoothing option was concocted to offer temporary and immediate fiscal relief to those school districts who faced educational or fiscal insolvency in the near term,” said Michael Borges, executive director of the state Association of School Business Officials (ASBO), according to the news report. An ASBO survey of 226 school districts found fewer than 4% of school districts planned to participate.