EdVANTAGE Blog

After an all-night session, the Assembly passed a deficit reduction plan and the Senate followed this morning.  Governor Paterson has said he will sign the legislation, even though does not think it goes far enough.

The bills do not include a mid-year reduction in School Aid as sought by the Governor.

The Legislature’s plan does include accelerating the use of $391 million in federal stimulus aid to allow the state to reduce its contribution to School Aid without reducing total aid payments received by school districts.  As with the Deficit Reduction Assessment included in the state budget enacted in April, districts will experience a reduction in state funding and a corresponding restoration from federal stimulus aid.

Using more of the stimulus money this year adds to a future state budget deficit.

As we reported yesterday, the Governor intends to unilaterally withhold some scheduled local aid payments, including School Aid payments in December (see Deal or no deal?  Governor threatening to withhold School Aid payments).

The Buffalo News reports,

While lawmakers won’t touch school funding, the matter isn’t over. The governor on Monday said that with lawmakers unwilling to address the full deficit, he is preparing a plan to reduce state payments scheduled to be made in December to various local entities, including school districts.

Under one plan being eyed, schools could face a delay in as much as $300 million in payments, though Paterson plans on turning those delayed payments into actual cuts when he unveils next year’s budget plan.

Today, the Governor issued a statement reiterating his threat.  He said,

In the coming days, I will direct the Division of the Budget to reduce State aid payments administratively in order to balance the budget and prevent New York from running out of cash.  I have been and will continue to meet with Budget Director Robert L. Megna and Comptroller Thomas DiNapoli to assess the current cash-flow and revenue situation. Once that assessment is complete, I will announce the specific local assistance reductions I will implement unilaterally.

As we noted, it is debatable whether the Governor does have the authority to unilaterally withhold School Aid, since it is paid according to formulas and schedules which are prescribed by state law.

With no immediate School Aid cuts included in their plan, the bills being acted upon by the Assembly and Senate do not contain the Governor’s proposals to allow districts to use excess Employee Benefits Accrued Liability Reserve funds to offset cuts or to force districts to expended any unreserved, unappropriated fund balance.  See Governor’s new deficit reduction plan would require schools to exhaust reserves now.

Assembly Speaker Sheldon Silver acknowledged that the Legislature’s plan does not cover  the full deficit.  In a statement, he said the plan would close a $2.7 billion gap acknowledged the entire deficit this year may be as high as $3.9 billion.

The Legislature also passed a bill to create a Tier V for new entrants into public retirement systems.

Here is how an Assembly news release sums up the provisions for ERS and TRS:

The legislation establishes a Tier V plan for members of the New York State and Local Retirement System/Employees Retirement System for employees whose start date is on or after January 1, 2010. The plan will:

• Limit the amount of overtime that can be used in the calculation for final average salary. The overtime ceiling would be $15,000 annually starting January 1, 2010, and would increase by three percent annually;
• Require ten years of creditable service in order to vest with the retirement system;
• Increase the penalty for retirement before age 62 to a maximum of 38 percent; and
• Raise the minimum retirement age to 62.

The Tier V plan for the New York State Teachers’ Retirement System for employees whose start date is on or after January 1, 2010, will:

• Require ten years of creditable service in order to vest with the retirement system;
• Raise the minimum retirement age to 57 with thirty years of service;
• Make permanent retiree health insurance protections; and
• Allow for an early retirement incentive.

UPDATE:

The bill also provides for a 3.5 percent employee contribution for TRS members’ entire careers.

Finally, the bill includes this statement indicating that the Legislature intends enact a “55-25″ retirement incentive with a three-month window for NYSUT members in 2010:

The legislature hereby finds and declares its intent, in addition to the retirement benefit changes provided for in this act, to enact legislation, in conjunction with the executive, which would offer a three-month period during calendar year 2010, during which members of the collective bargaining unit of the New York State United Teachers (“NYSUT”) within the New York state teachers retirement system and the New York state and local employees’ retirement system who have reached fifty-five years of age and have accumulated twenty-five years of service as a member of either such retirement system, may retire early without penalty.