Look at the employment data released recently by the US Department of Labor. Local governments eliminated 76,000 jobs last month, most of them teachers. Local governments are "100,000 Herbert Hoovers" because they have to balance their budgets.
As I wrote last Spring, teachers are now paid more than the median household in the localities where they live — at least that is the case in Dobbs Ferry where I live. Teachers have priced themselves out of a job.
The teachers union doesn’t appear to understand that it needs to refocus its attention from wage and benefits increases to protecting the employment of its members. When public servants are paid more than the median household in the community they serve, then the tax base can no longer support them. Since localities can’t print money like the Federal Government, the only remedy that mayors and school boards have is to raise taxes or cut costs; they cut jobs. Local governments rarely borrow money to fund operating shortfalls — partly due to legal restrictions and partly due to political considerations. Since local taxpayers have seen their income and assets decline during the Great Recession, politicians are cutting jobs rather than raising local taxes. The Village of Dobbs Ferry cut 4 jobs last budget cycle or about 5% of the municipal workforce. Last year, the Dobbs Ferry School District was able to avoid job cuts — one 1/2 time teacher was cut in the elementary school — by changing to a cheaper health care plan. But that one-time fix will not solve the massive increase in pension costs being levied on the School District this coming budget cycle. Pension costs are up because the New York State pension fund was decimated by the financial crisis. Either the School District will have to draw down its reserves, raise taxes by close to double digits or cut teachers. My bet is 1/2 reserves and 1/2 cutting teachers.
The problem with taking on the teachers union is that teachers are sacred cows — and rightfully so. I went to back-to-school night last week and can tell you the teachers at the Dobbs Ferry High School are wonderful people who really care about kids and have the highest level of professionalism. But, the teachers need to use their heads — they are all well educated — and refocus their union of preserving jobs, not increasing compensation.
One solution to the pension issue is to cap the ‘defined benefit’ at 50% of median household income. For Dobbs Ferry, that would be about $40,000 per year which in addition to social security should be enough money to live comfortably in retirement. Above 50% of median household income — which could be adjusted to rise with inflation after retirement (we have to protect people from the coming Obama hyperinflation) — teachers would get a contribution to a 401K based on % of salary (says 5%). The same pension cap should apply to all public servants — uniformed officers, civil servants and administrators.
Does Andrew Cuomo have the guts to propose a Tier VI New York State Retirement Plan? A Tier VI plan based on capping defined benefits at 50% of median household income and providing defined contribution benefits above that cap?