By JACOB GERSHMAN
A state measure that would allow school districts to defer $1 billion in pension payments over the next two years is gathering momentum in Albany.
The proposed legislation would give schools outside the city a short-term dose of fiscal relief that could help districts avoid teacher layoffs and other cutbacks. But it also comes at a cost to taxpayers, who would eventually pay tens of millions of dollars more to finance the plan.
Sponsored by majority members in both houses, the bill gives districts the option of capping the percentage of their payrolls contributed to the teacher pension fund at 8.6% for two years. The actual figure is rising to 11% in the next school year.
Districts would be allowed to borrow money through bonds to pay back the remainder plus interest in installments spread over as many as 15 years.
New York State United Teachers, a labor federation that helped develop the bill, estimates that it could defer $1 billion and protect jobs in strapped districts considering layoffs.
The just-passed state budget allocates nearly $20 billion to public schools, about what they received last year from the state. But last year, schools also got about $1.3 billion in federal stimulus aid, which has expired.
Under then-Gov. David Paterson, the state passed a similar law last year that covered two other major retirement systems with more than one million state and local members, including police officers and firefighters. That program alone will defer billions of dollars in pension payments over the next five years, according to fiscal observers, though many local governments have opted out.
In each case, state and local governments are essentially tapping into pension funds to blunt a spike in employer contribution costs caused by stock market declines and other factors.
A spokesman for Gov. Andrew Cuomo didn't respond to requests for comment. The measure has the backing of State Comptroller Thomas DiNapoli, a Democrat from Long Island. The board of the 430,000-member teacher retirement system, composed of teacher, school board and state government appointees, hasn't taken a position, a spokesman said.
The state's School Boards Association is supporting the bill, but with reservations. "It may not be the best solution for a school district," said David Albert, a spokesman for association. "I don't want to be negative on the bill because it's giving districts options. Ultimately, what would be most helpful is more state aid in the short term."
Some fiscal watchdogs say the plan masks the long-term problem of pension costs that could be more prudently managed by tightening wages and overhauling the defined-benefit system.
"It's essentially borrowing. It's kicking the can down the road, and it's fiscally risky," said E.J. McMahon, a financial analyst for the Manhattan Institute, a conservative think tank. Mr. McMahon is among those who support the idea of the state switching to a retirement payment structure modeled after 401(k) accounts.
Peter Abbate Jr., a Democrat who sponsored the bill in the Assembly, dismissed critics of the measure. "Do they take a mortgage out? Do they take out a car loan?" he said. "It's no different than any of that. It's how you manage the money."
