Editorials
OTHER VIEW: School districts must resist fund temptation
It’s like a kid staring into a candy store window.
The temptation is almost irresistible, especially if you’re a little hungry.
In the long run, though, it’s probably best just to walk away.
That’s the kind of temptation being faced by cash-strapped school districts as they consider whether to tap into a collective reserve fund for future retirement benefits. In the short term, it might be satisfying. But they’re going to pay dearly for the decision in the long run.
At issue is a savings account of millions of dollars, built up by 215 school districts across the state to pay for the retirement costs that will hit them when teachers retire. It was smart for the districts to set up the account because unexpected retirement expenses can come out of left field and decimate a school budget.
This isn’t surplus money that the district has sitting around for emergencies. This is a fund set up specifically to pay for costs districts will incur in the future. Having the fund to use for retirement will allow districts not to significantly raise taxes in a given year to pay for the retirement expenses.
But now school districts are facing midyear budget cuts from the state and an uncertain future with regards to state aid in the coming years. Along with other rising expenses from new contracts and growing citizen backlash against raising taxes, some districts are thinking about dipping into that retirement reserve fund to help tide them over until the current budget crisis passes.
While it’s certainly tempting, it’s probably best just to walk away.
For starters, those retirement costs are not going to go away. In fact, they could get unexpectedly larger. How will the districts pay for those expenses if they start depleting the reserve fund? The Empire Center for New York State Policy discovered a clause in the state’s new Tier 5 pension system legislation that could result in districts paying millions more in retirement costs than anticipated. The clause is an early retirement incentive that gives teachers a three-month window in 2010 to retire early without penalty at age 55 if they’ve accumulated 25 years of service.
If teachers take their districts up on the early retirement incentive, you could see an unexpected wave of new retirement costs for which districts will be immediately responsible.
Queensbury, one of the districts considering raiding the fund to pay expenses, has put $8 million in the fund since 1999. If it taps that fund now, how will it pay for those retirement costs in the future — especially if they rise unexpectedly?
The other problem with raiding the fund is that it takes away the incentive for districts to make tough budget cutting decisions. It’s the same reason why so many are opposed to Warren County raising its sales tax.
Having that pool of money discourages government boards from tightening their belts and invites unions to seek more generous contracts. Faced with impending state budget cuts, school districts should be focusing on cutting fat in their budgets and looking for ways to become more efficient through shared services, not finding one-shot revenue sources to pay for it.
We understand the dilemma superintendents find themselves in with state budget cuts.
But raiding a fund set aside for long-term expenses is a temptation they’d be smart to resist.
— The Post-Star of Glens Falls
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