CAPITAL REGION — As Schenectady school district leaders developed the annual budget for the 2013-2014 school year, they boosted the local tax haul 1 percent, received a 4.2 percent increase in state funding and spent over $2 million in district reserves.
All told, the district increased spending by 2.1 percent over the prior year.
But despite the spending boost, officials increased class sizes at all elementary schools, diminished scheduling flexibility for older students, halved the number of sites that taught English as a second language, eliminated dozens of teachers aids, shuttered the Blodgett preschool center and slashed spending on operations and maintenance.
While the budget trimmed investments in various student services, one expense category shot through the roof: the line-item for employee benefits grew that year by over 17 percent.
The dollars saved from the programs cuts still fell short of making up for the growing cost of employee benefits, which grew by nearly $6 million that year, a larger increase than earlier years but still part of a clear trend.
“This budget represents some very difficult decisions about programming and resource allocation,” Schenectady Superintendent Larry Spring wrote in the cover letter to what was his first budget at the district’s helm. “In this school budget, we have no choice except to pare back our expenses to meet our revenue projections.”
Employee benefits across the Capital Region that year rose by over 9 percent, while money spent on student instruction — costs like teacher salaries, curriculum development and BOCES programs — rose by less than 2 percent.
Since 2004, the cost of school district employee benefits in the region — primarily health insurance and pensions — has grown by around 90 percent, swallowing larger and larger chunks of school district budgets over time. As the benefits costs have come to represent larger slices of school budgets, instructional costs have shrunk as a portion of budgets.
In six Capital Region counties — Albany, Schenectady, Saratoga, Montgomery, Fulton and Schoharie — the combined cost of paying for health and pension benefits for school employees has grown from just over $300 million in the 2004-2005 school year to over $575 million this year — a 90 percent increase — according to an analysis of over 40 school district budgets since 2004.
"This tension between benefit costs and everything else is something districts have been wrestling with for quite a few years, especially in really bad years," said Bob Lowry, of the New York State Council of School Superintendents. "People don't want to hear you refer to things as uncontrollable costs; pensions are close to uncontrollable."
The cost of employee benefits has cut into the share of district budgets that can be devoted to instructional expenses like curriculum development, BOCES programs and student support services.
In 2005, 19.3 percent of the region’s school budgets were devoted to employee benefits; by 2015, 23.5 percent of school budgets went to the increasing benefit costs. In Cobleskill-Richmondville schools in Schoharie County, for example, less than 18 percent of its 2004-2005 budget went to benefits, while this year employee benefits accounted for over 30 percent of its budget. The benefits line-item for the district more than doubled since 2004, climbing from $5.4 million to nearly $12.5 million this year.
Cobleskill-Richmondville Superintendent Carl Mummenthey said the district’s share of the budget devoted to benefits may be inflated because they count some staff salaries under grant funds but still cover their benefits out of the general fund. But he also acknowledged that the benefits costs represent a growing share of the budget and “if you run that escalator” of health and pension costs, it will continue to do so.
As the benefit costs grow, district officials look to efficiency savings, state aid and local taxes to make up the difference and preserve or expand programs offered students.
“We are really focused on program. Are we offering academic programs that prepare our students for college and career?” Mummenthey said. “Even though we are working with a diminishing portion of the budget, we are delivering that to students. ... It gets a lot harder.”
'Everything is on the table'
Each year, as districts begin work on their annual budgets, business officials and superintendents lay out the district’s “rollover budgets,” the cost to maintain the same level of student services as provided under the previous budget, while absorbing rising costs. It’s the cost of employee benefits — and to a lesser degree contractually-guaranteed salary increases and other expenses — that make it more expensive every year to provide students the same services.
This year alone it will cost districts statewide $1.5 billion to maintain the same services currently offered in schools, according to estimates from the Education Conference Board, a coalition of groups that represent the state’s teachers, administrators and school boards.
Those same groups estimate that the amount of money from the state’s core education funding formula earmarked for districts other than New York City in Gov. Andrew Cuomo’s budget proposal falls short of covering just the increase in what districts will be required to pay into state pensions.
When Cuomo presented his budget last month, a state lawmaker interrupted him and shouted that he wasn’t offering enough aid to needy districts. Cuomo’s response: “There’s never enough.”
Educators argue that if the state funded schools at the level spelled out in that state funding formula, which is billions short of its own targets, the benefit costs would have less of an impact on budgets. They also argue that other constraints imposed by the state — like a cap on how much districts can raise local taxes each year — makes it more difficult for districts to wrestle with the growing costs.
“They eat away at trying to provide more education services to the students; you have to give somewhere,” Michael Borges, director of the New York State Association of School Business Officials, said of the growing benefit obligations on districts. “The tax cap and insufficient state aid will put pressure on districts to find savings in their budgets to make up the shortfall. … Everything is on the table when that happens.”
When asked most superintendents say the growth trends in employee benefits are not sustainable over the long run. But they also say school districts are limited in how much they can do to constrain the major cost drivers.
The amount of money districts are required to contribute to the state pension system is set by boards that oversee the massive pension funds. Districts pay a set percentage of their overall payroll. This coming budget, districts are expecting to pay a slightly higher rate than last year — about 10.5 percent. From the late 1990s to the mid-2000s, the contribution rate hovered just slightly above zero. Over the past dozen years it has climbed back into the double digits, fueling the growth in benefits costs.
Districts and their advocates have called for the authority to establish reserve funds devoted to pension contributions and health insurance costs. When those contribution rates go below what was projected, district could set aside the savings; when they go higher than expected, districts could spend out of the reserve fund.
“That would be a tool the Legislature could give us that would help us manage the problem more effectively,” Mummenthey said. “It would smooth out those peaks and valleys.”
Advocacy groups have also suggested state officials do more to utilize the state’s purchasing power to buy prescription drugs and other health care in an effort to control health care costs, a major drive in the benefits equation.
Cobleskill schools expect employee benefit costs to grow 8 percent in the upcoming budges, contributing to a budget shortfall of $1.2 million, Mummenthey said. With a tax cap that will come in above 2 percent, Mummenthey said the district will likely go to voters with a budget that asks to raise local schools taxes — though not as high as what the district’s tax cap will be, he said. District officials are also looking at budgeting reserves to help cover the shortfall, but he couldn’t commit to staving off all cuts to student programs.
“It’s a delicate balance of meeting the needs of students and recognizing the capacity of our community to pay,” Mummenthey said.
In Shenendehowa schools in Saratoga County, district officials are projecting employee benefits will grow by 25 percent over the next three years, while the overall budget is projected to grow by 10 percent, according to a three-year forecast presented to the school board earlier this month.
Health insurance costs represent a larger piece of the employee benefits than payments for teacher retirement, costs that have risen across the board and present a budget challenges to employers in both the public and private sectors. Health insurance prices nationwide grew by 27 percent from 2000 to 2016, roughly the rate of growth experienced by school districts in the region over the same time period.
Districts work to control health costs by joining together to purchase health insurance packages in consortiums as well as negotiating contracts that ask teachers to cover a larger share of the insurance costs. But they still continue to climb — something district officials say is likely to continue until state or federal lawmakers find broader health care reforms.
Carl Korn, a spokesman with teachers union New York State United Teachers, said teachers in recent years have shouldered a larger share of their health insurance costs in an effort to share in controlling the growing costs. He also said that unions are willing to work with all workers interested in a "secured and dignified retirement."
“That’s been the history: teachers live in their communities, they care about kids, they care about their public schools, and they’ve been willing to do their part to help school districts facing financial challenges,” Korn said.
Graphics by Kathryn Hume/Daily Gazette. Data collected from the New York State Education Department fiscal masterfiles and school district budget documents.
Six-figure pension club
There are at least 39 retired educators from Capital Region school districts with maximum annual pension payments in the six figures, according to the SeeThroughNY database of educator pensions.
The following includes their name, last employer and their pension benefit:
- Kevin Baughman, Niskayuna Central Schools: $142,266
- John MacFadden, Saratoga Springs City School District: $140,987
- James Schultz, Burnt Hills-Ballston Lake Central Schools: $138,233
- Randy Ehrenberg, North Colonie Central Schools: $137,299
- Janice White, Saratoga Springs City School District: $132,662
- Leon Reed, Schuylerville Central Schools: $131,418
- James McCarthy, South Glens Falls Central Schools: $129,650
- Michael Tebbano, Bethlehem Central Schools: $129,199
- Peter Kopcha, Capital Region BOCES: $119,202
- Linda Jackson-Chalmers, Albany City School District: $117,975
- Stanley Maziejka, Stillwater Central Schools: $114,968
- John Falco, Schenectady City School District: $114,869
- Thomas Mele, Saratoga Springs City School District: $114,829
- Valerie Kelsey, Schalmont Central Schools: $114,425
- Michael Marcelle, South Colonie Central Schools: $113,333
- Eva Joseph, Albany City School District: $112,374
- Thomas Rybaltowski, North Colonie Central Schools: $111,932
- John Adams Jr., South Colonie Central Schools: $111,100
- Clifford Moses, Galway Central Schools: $110,337
- Daniel Starr, Corinth Central Schools: $110,228
- Stuart Byrne, Saratoga Springs City School District: $107,424
- Edward Dopp, North Colonie Central Schools: $106,933
- David Foust, South Colonie Central Schools: $106,273
- Richard Rose, Canajoharie Central Schools: $105,270
- Ronald Limoncelli, Amsterdam City School District: $104,960
- John McGuire Jr., Guilderland Central Schools: $104,006
- Robert McClure, Shenendehowa: $103,734
- William Schwartz, Ravena-Coeymans-Selkirk Central Schools: $103,556
- Douglas Burton, Fort Plain Central Schools: $103,169
- Gregory Aidala, Guilderland Central Schools: $103,063
- Silvia Ferlazzo, Albany City School District: $102,566
- Helen Stuetzel, Ballston Spa Central Schools: $102,380
- John McAndrews, Niskayuna Central Schools: $102,289
- Diane McIver, Mohonasen Central Schools: $101,621
- Stephen Pavone, Gloversville City School District: $101,443
- Charles Dedrick, Capital Region BOCES: $101,321
- Katherine Sullivan, Johnstown Public Schools: $100,703
- Thomas Perillo, Amsterdam City School District: $100,338
- Kurt Jaeger, Saratoga Springs City School District: $100,336