kitchen table math, the sequel: Yonkers bites the dust

Friday, April 6, 2012

Yonkers bites the dust

Ed just told me about the Yonkers report. I'd been wondering when that shoe was going to drop.

The unreality around here is .... harrowing. You hear people say that "we" ("we" as in the school district) don't pay pensions (the state does), and the state should begin paying for mandates, too.

Of course, if the state were to begin paying for mandates, we'd be spending more on mandates, not less, because we'd be paying for mandates in Yonkers as well. Yonkers is broke, but they've still got mandates.

Nobody understands retiree benefits, either, including me. The Irvington school district, population roughly 7000, has a liability of $101 million for retiree health care. A friend of mine, an accountant, says that we are "fundamentally bankrupt."

What I don't understand is: when does the shoe drop?

Does it have to drop?

Or can we just go on like this forever, paying health care for all current teachers and all retired teachers as we go?

If we can't go on like this forever, when do we end up like Stockton?

Stockton: 292,000 citizens; $400 million retiree health care liability
Irvington: 7000 citizens; $100 million retiree health care liability for the school district alone
"Stockton officials awarded [retiree health care benefits] to city employees in a series of votes in the 1990s but made no effort to fund them, intending simply to pay costs out of their budget as workers retired. As hundreds did just that over the years, the costs grew. Next year, the city's fiscal documents project, retiree health costs will surpass those of the city's regular work force. At last count the city's unfunded liabilities for retiree health care are above $400 million.

Stockton Mayor Ann Johnston voted for these expensive measures when she served on the city council. "We didn't have projections into the future what the costs might be," she told the Record, a Stockton newspaper, earlier this month. She added, "I learned that you don't make decisions without looking into the future."

Council votes to approve ever-greater benefits were often unanimous, according to Record columnist Michael Fitzgerald. "Nobody gave thought to how it was eventually going to be paid for," says Mr. Deis, the city manager."
How Stockton, California Went Broke in Plain Sight by Steven Malanga
I gather we've got at least one current board member who thinks retiree health care costs are nothing to worry about; that $101 million is a paper liability, not a real one.

I fear we've also got at least one person running for school board who has told parents that 'we don't pay pensions,' and another who told me personally, when she was serving on the board two years ago: "We're parents. We can't deal with unions."

My accountant friend tells me that when he ran the figures he found that Irvington teachers in the first 17 years of their careers receive average 5% raises each year, not counting "grid increases." ("Grid increases" are the across-the-board increases in everyone's pay the union negotiates every 3 years when the contract expires.) Add in the grid increases and teachers have been averaging something in the neighborhood of 7%, I think. Year in, year out. With inflation running at 2% until the crash, below 2% since.

I gather, too, that NY has some kind of law forbidding local school boards from working together with other boards in union negotiations. The union has national backing and expertise to draw upon; the volunteers who serve on local boards are on their own.


SteveH said...

"The union has national backing and expertise to draw upon; the volunteers who serve on local boards are on their own."

And money. Our school board specifically commented about this disparity and tried to get the state legislature to allow for combined town or state-wide negotiations. It failed. Of course.

The union doesn't want people to see the man behind the curtain. That's why the full-page ad in our paper talked only about the teachers association and how people should support our children and teachers. I'm sure lots of places never see the word "union".

Independent George said...

I work in an accounting firm, and most people here don't really understand the pension problems, either. Not because they can't - clearly, they understand what liabilities and net present value are. It's that they can't comprehend that the money promised doesn't exist. That things could have lasted this long based on vapor.

I think this is what most people are inclined to believe, and what will be sold to us - that if there is no money, it's because someone stole it, or didn't pay their fair share.

I'm willing to bet that every one of us knows someone we love who has received a generous pension upon retirement. Our natural instinct is to smile and say they earned that generosity, and that everyone should get it. Only a heartless robot would wonder where the money comes from, and what it costs to maintain that generosity.

Allison said...

the problem is not with the number of heartless robots, the problem is that what's in the best interest of an individual is counter to the best interest of a functioning society.

We've reached the point where we tell our selves or our children "get a govt job" because it's the only way to be financially secure, even as the inequity grows by doing so.
towns like Irvington are going to rip apart as the "haves" are the schoolteachers in town and they "have nots" are paying for them, while no one has any other town services anymore, and the anger will still be mixed with envy. If only we could have that pension instead!

Independent George said...

I agree, but the point I'm making is that when the debate is math vs emotions, emotions win 8 out of 10 times. Moreover, it's not a random 8/10 - emotions win consistently until the math proves insurmountable. By the time most people understand the problem, it's too late to fix easily. I'm surrounded by accountants who are in denial over a problem they're paid to find in other contexts. How do you convince people who've never even thought about their own retirement that there's a problem and that it's been steadily building for forty years?

lgm said...

I think the holidays have taken care of the awareness issue. We all seem to have gov't worker relatives who retire after 20 yrs or less on very good pension w/bennies and have no problem spouting off to the world about their vacation travels & second homes and fail to notice the others at the table who are on 401K and certainly have done the math,figuring there is no way they can fund a retirement that nice or college for their children while they are paying so much in taxes to support the gov't workers who have full medical for eternity (usually much longer than they actually worked) as well as college aid because their bennies aren't included in the financial calculations. We can vote on what, 2% of the school budget, while these people laugh all the way to the bank as they jack their compensation up each year? Voting is going to have to be done with the feet.