The New York State Teachers’ Retirement System (NYSTRS) has just informed school districts across the state that their teacher pension contribution rates for the 2013-14 school year will rise from the current 11.84 percent to between 15.5 and 16.5 percent of salaries — which would translate into an additional taxpayer costs totaling $539 million to $686 million, based on the latest available teacher payroll figures.*

pension-explosion-300x300-8988629The higher contribution is payable in the fall of 2014. Depending on the final rate, up to 2.6 percentage points of the projected increase — or roughly $390 million — would not be subject to the base property tax levy cap of 2 percent for 2014-15 school budget years.

Here’s another way of looking at it: the next increase in teacher pensions could be enough, all by itself, to drive up property tax levies by up to 1.8 percent, in addition to the cap.

The jump in teacher pension costs should come as no surprise, for reasons explained last July inthis blog post. In fact, nearly two years ago, the Empire Center’s “Pension Bomb” report predicted NYSTRS would bill a 16 percent rate in 2014, due to its huge losses in 2008 and 2009.   At 11.84 percent, the current contribution rate is just above the “normal” cost, but significant increases in taxpayer contributions will be needed to dig out of the fund’s losses in 2008-09.

NYSTRS also has just disclosed that its return on assets in fiscal 2012 was 2.8 percent, well below its target rate of 8 percent. By assuming it will earn more, NYSTRS holds down its contribution rate — but this produces a bigger hole to fill when the fund underperforms for a period of several years.  Teacher pension costs have nearly doubled since 2009-10, although the last increase in the pension contribution rates was a comparatively slight 0.63 percent, thanks to a conveniently timed change in actuarial assumptions last year. Again, it’s all explained in detail here.

Although NYSTRS is willing to make rate of return assumptions covering decades, it refuses to predictits future contribution rates more than a year in advance. However, calculations by Josh Barro in connection with our 2010 report, adjusted for subsequent earnings, would suggest the rate will rise by at least another point or two in 2015-16.

Contribution rates would be flat and predictable under a defined-contribution retirement system like the one available to public university faculty, an option most teachers say they would prefer to have the ability to choose. Don’t hold your breath waiting for Governor Cuomo or anyone in the Legislature to propose one — although Cuomo’s Tier 6 plan did create a DC option for higher-salaried non-union appointees only.

* The NYSTRS base member payroll was $14.732 billion in 2010-11. Unfortunately, NYSTRS still has not gotten around to releasing its 2011-12 annual financial report, which would include an updated payroll figure.

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

You may also like

On Measuring School Quality, Education Week Misses the Mark

Education Week’s rankings do not measure what counts. New York’s substandard achievement coupled with highest-in-the-nation spending and above-average wealth means that when it comes to school quality, New York fails to pass the mark. Read More

State Forces School Districts To Give Raises—And Layoffs

Months of bad decisions and inaction by New York state officials have put school districts in the awkward position of having to give pay raises to most teachers while laying off others. Read More

Even After Aid Cut, New York Will Spend Most on Education

If New York was a country in 2016—the most recent year for global education spending data—it would have boasted the highest per pupil expenditure in the world, even after subtracting 20 percent of state aid. Read More

“LIFO” strikes again

Rochester schools are laying off 152 teachers, but there’s little doubt which educators are on the chopping block. Read More

Where NY’s school money goes

It’s commonly perceived that New York’s education funding system directs more money to wealthier, whiter schools than to poorer, less white schools – and that the distribution of state aid reinforces those inequities. Looking at the totality of school spending across the state, however, different patterns emerge. Read More

Teachers union shrinks after Janus

New York’s statewide teachers union is collecting cash from about 6,000 fewer people than it was before the Supreme Court ruling that ended compulsory union fees for public employees. Read More

Tax cap wreaks chaos—not

In the wake of Tuesday’s school budget votes, 16 school districts around New York must decide whether to call for a second referendum after seeing their original proposals rejected. Read More

Albany matchup: Medicaid vs. schools

With the state facing its grimmest budget outlook in years, the legislative session shows signs of becoming a tug-of-war between public schools and health care—the two biggest recipients of state spending and, not coincidentally, the two heaviest-hitting lobbying forces Albany. Read More


Sign up to receive updates about Empire Center research, news and events in your email.


Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130


The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.