EdVANTAGE Blog

State Comptroller Thomas DiNapoli made it official today, announcing that the employer contribution rate for the State and Local Employees Retirement System (ERS) will rise in 2011, from 7.4 percent of payroll to 11.9 percent.

We previously reported on projected dramatic ERS cost increases continuing past next year (“State study warns ERS pension costs could triple by 2015.”)

Only about 20 percent of school employees are in ERS; most are in the Teachers Retirement System.  TRS will announce an estimated range for its contribution rate in November and will announce an estimated actual rate in February.  The official rate will be announced in July 2010, but in recent years the final rate has been the same as the estimated rate announced in February.

TRS is generally subject to the same pressures and losses affecting contribution rates as ERS.  This year, TRS has one advantage in that ERS sets its rate based on the value of its investments at the end of its fiscal year on March 31st.  The TRS fiscal year ends on June 30th and gains in equity markets over those intervening months may slightly mitigate increases in the TRS contribution rate.

Pension contributions are calculated as percentage of payroll.  Payroll is typically about half of a school district budget.  So if the contribution rates for both systems rose by an average of 4 percentage points that by itself could drive up total school spending by 2 percent, even if all other spending were frozen.