Establishes the "retirement for advanced career teachers program" which provides a temporary retirement incentive to certain retirement systems

Justification

In the 2009-10 school year, over 5,000 teachers and other school-related professionals around New York state are facing layoffs and there are another 5,000 teaching and other educational support positions slated for elimination through attrition. Barring a major economic recovery that is extremely unlikely at this juncture, it is probable that these numbers will increase significantly over the next several years.

Unfortunately, these workforce reductions, which will fall disproportionately on newer workers with student loans and young families, will negatively impact the delivery of quality public educational services around this state and mark a step backward in the fight to close the achievement gap. Moreover, these job reductions will have much more negative financial repercussions in already economically fragile communities around this state.

Most school districts and other educational employers are self-insured for unemployment benefit purposes. This fact requires that each educational employer pay the entire unemployment insurance benefit available to each eligible employee on a dollar-for-dollar basis. Using a conservative estimate that 75% (or 3,750) of the displaced educational employees are eligible for the state maximum weekly unemployment insurance benefit of $405, the current scenario will require affected educational employers to pay over $1.5M in unemployment benefit costs per week. Moreover, given the suspension of growth in the foundation formula enacted in the State Budget for the 2010-2011 school year and the rise in the unemployment rate generally, it is unlikely that these workers will be able to find other comparable employment over the near term. If these displaced employees are not rehired within the next year, affected educational employers will have to pay over $75M in unemployment insurance benefits.

As most credible economists correctly indicated during the public debate regarding the enactment of the Federal Economic Fiscal

Stimulus package - laying-off middle-income workers has a far reaching, long-term negative impact on the overall economy. In New York state, the layoff of educational employees will require educational employers to increase class sizes, cut important programs and student services and pay increased costs for unemployment insurance. These laid-off workers, in turn, are forced to curtail discretionary spending at local businesses and are much more likely to default on their local property and school taxes, mortgages, auto loans and other outstanding consumer debt.

This legislation is designed to provide fiscal relief to educational employers and workers and to mitigate the broader economic, educational and social problems caused by laying-off educational employees. This legislation will immediately reduce salary costs for public educational employers and mitigate projected increases in cost for unemployment insurance. It will also mitigate the shorter-term economic hardships associated with laying-off younger workers with families and it will provide a spring board to address longer-term demographic problems stemming from an already aging "baby-boom" workforce.

If enacted, this legislation will empower school-district and other educational employees who are age 55 or older and whose years of service and age combined equates to eighty or more to retire from service without penalty. The reduction in payroll costs affected by this change will allow educational employers to save positions and programs, maintain appropriate class sizes, employee younger, lower salaried workers and to balance their budgets at a time of limited state support.

Over 80% of retired educational employees continue to reside in New York state after retirement. By maintaining purchasing power for both newly retired and younger workers, this legislation will help stimulate economic activity in communities small and large across the state. This, in turn, will help stabilize local communities and maintain the integrity and continuity of public educational services around the state.

Fiscal implications

This bill would provide a temporary retirement incentive in which eligible Tier 2, 3 and 4 members of the New York State Teachers' Retirement System would be permitted to retire without penalty upon the attainment of at least age 55 and where their age and years of creditable service combined equals eighty or more as of their effective date of retirement. An eligible member's effective date of retirement must occur during the open period beginning on July 1, 2009 and ending on August 31, 2009. Currently age 55 with 30 years of service or age 62 with five years of service, are required in order to retire without reductions.

The annual cost to the employers of members of the New York State Teachers' Retirement System for this benefit is estimated to be $15.5 million or .11% of payroll if this bill is enacted.

The source of this estimate is Fiscal Note 2009-67 dated May 21, 2009 prepared by the Actuary of the New York State Teachers' Retirement System and is intended for use only during the 2009 Legislative Session.

This bill would eliminate the early retirement reductions for Tier 2, 3 and 4 members of the New York State and Local Employees' Retirement System (ERS), New York State Teachers' Retirement System, the New York City Teachers' Retirement System, New York City Board of Education Retirement System and the New York City Employees' Retirement System who are employed by educational institutions and who retire between July 1, 2009 and August 31, 2009.

If this bill is enacted, insofar as it affects ERS, the additional cost will be shared by all educational employers over five year period, with the first payment due in the fiscal year ending March 31, 2011. We expect the annual cost to be up to .2% of annual payroll of educational employers.

This estimate, dated May 7, 2009, and intended for use only during the 2009 Legislative Session, is Fiscal Note No. 2009-237, prepared by the Actuary for the New York State and Local Employees' Retirement System.

Effective date

This act shall take effect immediately.