EdVANTAGE Blog

Last week, I reported that the Governor’s Budget Division had released a report on the savings his “Tier V” public pension proposal could achieve for state and local taxpayers.

That report received little attention from the media.

Another action by Governor Paterson concerning retiree benefits received even less media notice – none as far as I know.

The Governor announced appointment of a task force on public retiree health benefits.

School districts are not represented in the membership of the task force.

Not only that, that task force is directed to study the provision of health care coverage to public employee retirees, except those from school districts, BOCES, and New York City.

The Governor’s Executive Order creating the task force says it is to investigate and research current practices and possible changes to retirees’ health coverage, except for those from New York City and those covered by Chapter 729 of the Laws of 1994 and subsequent laws extending its application.

Chapter 729 is the law which barred school districts and BOCES from reducing health insurance benefits unless comparable reductions are made to benefits for corresponding active employees. If the active employees are represented by a union, any reduction would need to be collectively bargained.

One of the themes of the Council’s budget advocacy this year has been that even with optimistic assumptions concerning continuation of new federal support and recovery in the state’s fiscal capacity, schools face accelerating cost pressures, including rising pension contributions, mounting retiree health insurance costs, and a loss of “turnover savings” due to a slowing of retirements.

A few weeks ago, the State University at Buffalo issued a report on the potential fiscal impact of retiree health insurance costs with the ominous title, “The End of Local Government as We Know It.”

The UB report studied Western New York’s nine largest local governments, including two school districts. It concluded that the nine entities faced a combined $3.7 billion in unfunded liabilities for retiree health care over the next 30 years.

Last May State Comptroller Tom DiNapoli issued a report warning that state and local governments and school districts need to begin planning to accommodate costs for retiree health insurance, as directed by a national accounting standard.

Currently, schools and local governments have no legal way to set aside funds for these costs. The Comptroller has proposed legislation – which the Council supports – to create trust funds for this purpose.

It is hard to reconcile the Governor’s omission of schools from his task force study and his support for a property tax cap and insistence that public spending must be restrained in light of new economic realities.

Fiscal realities cannot be permanently eluded just by ignoring them.  Ultimately retiree health costs will have to be accommodated within school budgets that voters will support.