Early Retirement, Pension and Health Reforms to Control School Spending

April 2, 2010

Albany – Assemblymember Kevin Cahill (D-Ulster, Dutchess) pointed to efforts the Legislature has been undertaking aimed at helping school districts control spending. Pension reforms passed last year combined with an early retirement incentive working its way through the Legislature will reduce school personnel costs. The Assembly’s budget plan includes health insurance measures designed to curb rising premiums.

“It is clearer than ever that simply increasing state school aid will not address the crisis we have in education costs,” said Assemblymember Cahill. “Payroll, pension benefits and health insurance make up the bulk of school spending. I am working to make sure districts have the tools they need to control these costs over the long term.”

Assemblymember Cahill expressed his support for a measure that would save money for 2010-2011 budgets, avert layoffs and may free up positions for younger teachers. The legislation (A.10065A) provides for a temporary early retirement option for teachers who are members of the New York State and Local Employees’ Retirement System or the New York State Teachers’ Retirement System. The bill has passed in the Senate and is expected to be taken up by the Assembly.

“This temporary retirement option provides the budgetary flexibility our school districts need to balance their budgets during these tough times,” said Assemblymember Cahill. “Voluntary early attrition will allow schools to avoid layoffs off new teachers and save money by removing high salaried long-tenured employees from the payroll.”

The early retirement measure will help school districts stabilize their long and short term finances while protecting vital services. This bill is a continuation of efforts to reform the state’s pension system that started with the enactment of Tier V last year. Tier V is estimated to save the state up to $36 billion over the next thirty years and lower long term pension costs for school districts and all levels of government.

Presently, anyone who retires prior to 30 years of service is subject to a maximum 27 percent penalty. The bill allows educators and support staff to retire at age 55 if they have 25 years of service without penalizing them for early retirement. In order for qualified school employees to take advantage of this option, they must retire within a specific open enrollment period, starting June 1, 2010 and ending on August 31, 2010 for school districts employees and a 90-day period ending on December 31, 2010 for SUNY and community college employees.

The Assemblymember is also supporting other measures designed to reduce costs while protecting education. These efforts center on cutting expenses related to health insurance benefits for school district employees. Specifically, they include proposals in the Assembly budget plan that would require prior approval from the state Insurance Department before raising health insurance rates and increasing the amount of premiums insurers must spend on actually providing health care, commonly referred to as Medical Loss Ratio (MLR), limiting profits.

MLR would rise from seventy five percent for small group purchasers and eighty percent for individuals to eighty two percent for all policy holders. When combined, this proposal will save state government $70 million by applying downward pressure on insurance premiums, making it more affordable for school districts.

“Health insurance costs are eating up an ever larger portion of school budgets,” said Assemblymember Cahill. “Curbing these costs by enacting sensible reforms in the way the health insurance industry does business is an important step to cutting costs for schools and for all New Yorkers.”

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