Pension contributions are dropping due to good returns

Rick Karlin

Times Union

Aug 31, 2017

A strong stock market followed by good returns on investments are translating into lower employee pension costs for local governments and schools.

Comptroller Tom DiNapoli on Thursday said public sector contribution rates for their employees is dropping from 15.3 percent to 14.9 percent of payroll for the 2018-19 fiscal year.

For those in the police and fire retirement systems, the rate is falling from 24.4 percent to 23.5 percent.

While that represents a modest decrease in pension costs that localities including towns, cities and counties are required to devote toward retirement plans, school districts are seeing an even sharper drop.

Their contribution rates are falling from 11.7 percent for the last school year to 9.8 percent for this upcoming year.

Municipal government workers and uniformed employees are in their own pension systems, overseen by DiNapoli.

Teachers and other school employees are in a separate state Teachers Retirement System.

Timing of the contributions varies and it is too early to gauge how the decreases might impact school and property taxes. Most school property tax bills go out in September, but those bills reflect the last year’s cost, said Teachers Retirement System spokesman John Cardillo.

For the Employees Retirement System, the 14.9 percent payments from local governments aren’t actually due until February 2019. Both funds are large – the ERS is about $197 billion and it paid out almost $11 billion in the 2016 fiscal year according to data from the comptroller's office. There are about 441,000 beneficiaries.

The teachers fund stands at $115 billion, paying out about $6.7 billion per year to 155,000 beneficiaries.

Contribution rates have gone up and down over time usually in response to the rate of return that the funds generate, which reflects the overall health of the stock market and other investment vehicles.

Pensions, along with salaries and health insurance costs, are among the major expenses for schools and local governments. Health care costs continue to rise.

The NYSHIP health insurance program, for example, which is popular with many public employees, is poised to rise 9 percent for 2018, noted David Albert, spokesman for the New York State School Boards Association.

And the various private insurers used by other school boards are requesting increases from 11.5 percent to 16.6 percent. “While pension costs are going down health insurance costs are rising,” said Albert.