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6-18-15 Pension Study Released...Zuckerberg Newark Fund Winding Down

NJ Spotlight - New Report Raises Doubts About Cost of Shifting Teacher Pensions

John Reitmeyer | June 18, 2015

Rutgers study questions Christie administration claim that having local school districts assume responsibility would be ‘cost-neutral’

Among the sweeping changes to public-employee benefits recommended in a report Gov. Chris Christie embraced earlier this year was a proposal to shift state-funded teacher-pension costs to local school districts.

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Christie Administration Report on Shifting Pension Costs

Study Released by NJ League of Municipalities and NJ School Board Association

The idea is for the districts to take on that added expense after saving money by moving employees into less-generous healthcare plans, which was another one of the report’s recommendations.

But there was no detailed breakdown the report to show exactly how the cost-shift would work in a way that the benefits experts who drafted it maintained would be “cost-neutral.”

Yesterday, advocates for school boards and municipalities attempted to fill that information gap, releasing a new study with estimates outlining how much it could cost local school districts -- and the homeowners who fund them through their property tax bills -- to take on the burden of funding teacher pensions.

For the local officials, the study provided evidence for concern. Local officials have been skeptical that there will be enough savings realized after changing employee healthcare plans to take on the additional costs without raising property tax bills

But defenders of Christie’s report, including the pension expert who led the nonpartisan panel that drafted it, said the new study’s own math shows there is still potential for savings even after the cost-shift.

Christie, a Republican with presidential aspirations, embraced the panel’s recommendations in February as he was facing heavy pressure on the issue of public-employee benefits. It was less than a year before that a major piece of a signature reform effort that Christie signed into law in 2011 fell apart after the state didn’t take in enough tax revenue to fund increased state contributions into the pension system that were designed to reverse years of underfunding.

The new changes proposed by the panel of experts and immediately embraced by Christie included freezing the current pension system and moving employees into a new hybrid retirement plan with features of a 401(k). Public workers would also be moved into less-generous healthcare plans, with the savings being used to pay down the current pension system’s massive debt.

But those savings were also being counted on to be significant enough to also cover the cost of local districts taking on the burdens of paying for retired teachers’ healthcare and funding teacher pensions going forward. And the report envisioned employees and the school districts each making 4 percent contributions toward the new retirement plan.

The study released yesterday by the New Jersey League of Municipalities and the New Jersey School Boards Association indicated that if the school districts take on the 4 percent employer contributions it would increase their costs by an estimated $372.6 million across the state.

And each additional percentage point would add another $93.1 million to the tab, according to the study, which was compiled by Dr. Raphael Caprio, director of Rutgers University’s Bloustein Center for Local Government Research.

For homeowners, every 1 percent of teacher pension cost shifted onto the local districts would translate into the average homeowner statewide paying $28 more annually in taxes. If the contribution ends up being 5 percent, that estimated homeowner impact would jump to $140 more in taxes, according to the study.

Those findings were released yesterday amid an ongoing debate over what the state should do about public-employee benefits following a decision handed down last week by the state Supreme Court in a major pension-funding case that challenged Christie’s decision to reduce the promised state pension payments that were a major part of the 2011 reform effort.

Public-worker unions sued the state, arguing the payments were a contractual right of the employees shielded by constitutional protections, but the high court sided with Christie’s administration in a 5-2 ruling.

Now, Democrats who control the Legislature have sided with the unions in arguing that the pension-funding law should be followed, even if the Supreme Court isn’t requiring the state to do so.

They have called for increasing the income-tax rate on earnings over $1 million to help bring in more revenue.

But Christie and Republican lawmakers have embraced the new changes spelled out in the report issued by the nonpartisan panel of experts, arguing the state simply can’t afford to cover the current cost of employee pensions and health benefits.

Piscataway Mayor Brian C. Wahler, who serves as president of the state League of Municipalities, said the study released yesterday “illustrates in real numbers what the local property tax impact will be shifting the state’s cost to local property taxpayers.”

“Our major concern, and those we believe of property taxpayers, is whether this roadmap is cost-neutral,” Wahler said. Lawrence S. Feinsod, executive director of the state School Boards Association, said his organization has the same concern.

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And not included in the analysis was how the local districts would also take on the estimated $1 billion cost of paying for retired teacher health benefits that’s also called for by Christie’s panel.

“The most critical issue right now is what would happen to educational programs, and local property taxpayers, if school boards are required to take on these new costs today,” Feinsod said.

But Thomas Healey, a pension expert who led Christie’s benefits-review commission, said the new study’s cost estimates came in lower than those used for the report, which bodes well for the commission’s premise that implementing all of the recommendations would ultimately be cost-neutral for homeowners.

“As set forth in our report, there should be no net cost to this shift,” Healey said.

He also said that changing employee healthcare coverage could save the average homeowner up to $800, leaving “far more than enough” room to absorb the estimated added costs from the teacher pensions.

Spokesmen for the state Department of Treasury said they were reviewing the report but did not provide any comment on its findings.

 

NJ Spotlight - What's Left of Zuckerberg's Gift? $30 Million of Funds Given to City’s Schools…With a year to go, Foundation for Newark’s Future makes some smaller, still-critical, endowments

John Mooney | June 18, 2015

 

Four years down, one year -- and about $30 million -- to go.

That’s the timeline for the Foundation for Newark’s Future, the sometimes-controversial fund launched in 2011 with much fanfare by Gov. Chris Christie and Facebook founder Mark Zuckerberg as a $200 million act of philanthropy for Newark public schools.

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FNF 2014-2015 Grants

The original Zuckerberg gift came in at $100 million and was matched by a host of donors, bringing the total to $200 million.

And while the Newark schools -- district and charter -- remain by far the biggest beneficiaries, the fund is starting to branch out a little from just education-related projects.

Earlier this spring, FNF announced a $1.5 million contribution to the City of Newark’s summer youth-employment program, which could potentially serve 2,300 teenagers. And last week, it was another $1.5 million to the Newark City of Learning Collaborative project being led by Rutgers-Newark along with other institutions to lift college graduation rates in the city.

“If the goal is to improve educational outcomes for kids, we can’t just stop at high school,” said Kimberly McLain, FNF’s president and CEO in an interview last week with NJ Spotlight.

“We believe it’s a natural place for us. It’s not just getting them to college, but through it and giving them the supports they need,” she added.

Each was FNF’s first contribution to either the city or university-based programs.

And in an hour-long interview in the foundation’s offices off the city’s Military Park, McLain said there could be more to come, although she was not offering much in terms of detail until the projects were decided on.

“What we are excited about is to make investments that are going to be impactful, sustainable, and will outlast us,” McLain said. “I think you will see us spend a lot of time focusing on ways we can partner with the community and organizations.”

Up to now, the biggest investment in the district was to the Newark teachers contract in 2012, helping cover both retroactive pay and the district’s historic performance bonuses for exemplary teachers.

That contract runs out this summer, and there has been little progress getting state-appointed Superintendent Cami Anderson and the Newark Teachers Union to even sit down to negotiate, let alone reach a new deal.

When asked whether FNF would help extend those bonuses or other contract-related costs, McLain said she couldn’t speak to that without a new contract on the table.

‘That is so hypothetical,” she said. “But if they come to an agreement and they come to us, I’m sure we’d consider it.”

She said the foundation was doing an evaluation of the contract that it would release in the coming months. FNF was also among the funders of a retraining program for school staff laid off in the district.

The fund has also benefited charter schools, with close to $50 million raised through the Zuckerberg gift and the New Schools Venture Fund and the Newark Charter School Fund.

But as the foundation scales down -- it now has four employees, down from nine -- the past year has seen numerous smaller grants as well. For example, FNF continues to focus on early literacy through its “My Very Own Library” program in 21 schools.

McLain maintained that the money has brought important change and progress, citing especially its early-childhood initiatives and literacy programs. But some of its beneficence has been controversial, coming in the midst of fierce debate in the city over the stewardship of Anderson and the state’s control.

Outside consultants have been among the recipients of funding; this past year $1.4 million went to the New Teacher Project, finishing up the group’s work in implementing the new contract and the teacher evaluation system that it required. In addition was $135,000 to the Parthenon Group, a global consulting firm that has built performance reports and other data-based projects for schools.

The fund has played a minimal role in the development of the One Newark plan launched by Anderson last year, a universal enrollment system that placed students in both district and charter schools.

But McLain didn’t shy from public debate over the plan -- some of the street protests that could be heard right outside her office windows.

“I think the notion that all students have access to all schools in the city is a good thing,” she said. “With any new comprehensive undertaking like this, there are going to be issues to be addressed, and the district is working hard to address those.”

The plan remains that a year from next week, the Foundation for Newark’s Future expects to close up shop, and McLain said its impact has been profound and, she hopes, lasting.

“The sunset is still five years, and we will officially close our doors in June, 2016,” she said. “At least that is the current thinking, but obviously that will be up to the board.”

“We started the foundation in order to improve the educational experiences for the children in Newark,” she said, “and I think we have made progress in that regard.”


Garden State Coalition of Schools
160 W. State Street, Trenton New Jersey 08608
609-394-2828