State TRS Costs Expected to Rise Again

The New York State Teachers’ Retirement System has informed school districts to expect a six to nine percent increase in the employer contribution rate for the 2014/15 school year.

The TRS said the current year’s rate of 16.25 percent of payroll will rise to between 17.25 and 17.75 percent. A more “precise” estimate of the rate will be issued in February 2013, according to an administrative bulletin sent to school districts across the state. That estimate is expected to be closer to the actual rate that will be assessed.

The TRS provides pensions to school employees who hold State Education Department certificates, including teachers, teacher assistants and administrators. The TRS contribution rate is expected to jump again for the 2014/15 school year.

The Huntington School District expects to pay $6.7 million into the TRS during the 2013/14 school. That amount would jump by an estimated $402,000 to $603,000 to between $7.1 million to $7.3 million depending upon the final rate set for 2014/15.

“The NYSTRS is a legislative construct and unfortunately associated costs are non-discretionary in nature,” Superintendent James W. Polansky said. “The increase in TRS costs over the past five years has been beyond considerable. In fact, the increase from 2012/13 to 2013/14 alone was over 37 percent. Although the increase from 2013/14 to 2014/2015 is expected to fall back into the single digits, the total cost will remain one of the most significant single expenses in the 2014/15 budget.”

The one year rate of return on TRS assets for the fiscal year ending June 30, 2013 was 13.7 percent. The five year annualized rate of return is 5.2 percent, significantly higher than last year’s five-year return rate of 1.1 percent. Most of the pension system’s revenue comes from the return on its investments, with the balance comprised of employer and employee contributions.

State law requires districts to contribute to both the TRS and ERS at set rates. The state’s property tax cap law provides some relief to districts when the increase in pension costs exceeds two percent. A portion of the increase over two percent is exempt from the cap.

The TRS said that “barring poor investment returns or large demographic changes, this year (2014/15) potentially represents a peak in the ECR (employee contribution rate). ECR should begin to level off.”

The TRS employer contribution rate has risen steadily since 2002/03:

·   2002-03        0.36 percent

·   2003-04        2.52 percent

·   2004-05        5.63 percent

·   2005-06        7.97 percent

·   2006-07        8.6 percent

·   2007-08        8.73 percent

·   2008-09        7.63 percent

·   2009-10        6.19 percent

·   2010-11        8.62 percent

·   2011-12        11.11 percent

·   2012-13        11.84 percent

·   2013-14        16.25 percent

·   2014-15        17.25-17.75 percent (estimated)