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Law Allows Schools to Borrow Millions, but Cuomo Likely to Veto

A measure that would allow school districts around the state to borrow as much as $1 billion over the next 15 years to cover skyrocketing pension costs passed both houses of the legislature, but Gov. Cuomo says he will veto it.

Amidst the passage of a slate of historic legislation, including the , a property tax cap and expanded rent-control laws, lawmakers last week quietly approved a bill that would empower school districts to borrow up to $1 billion to cover increases in the costs of employee pensions.

In New York, shortfalls in the state pension fund are closed with taxpayer money. The perfect storm of the recession and a growing number of pensioners as Baby Boomers reach retirement age has significantly spiked the pension burden for school districts statewide.

The bill, which passed both houses, allows districts to sell 15-year bonds, the revenue from which could be used to offset skyrocketing retirement contributions over the next few years. Local governments already have the option, known as amortization or "smoothing." Supporters say it's a quick fix that can be paid off in better times.

"School districts have had to make painful choices over the past few years and this short-term option will help these districts navigate through the difficult economy," said Sen. Andrea Stewart-Cousins (D-Yonkers).

Gov. Andrew Cuomo will likely veto the measure, a spokesman said, though he declined to explain further. The first-year governor closed a $10 billion budget gap without raising taxes or borrowing, and made a strict cap on property tax increases a top priority. He also repeatedly called on school districts -- sometimes in harsh terms -- to work harder to eliminate waste and corruption.

In Yonkers alone, Stewart-Cousins said, the bonding option could restore close to $5 million and avert hundreds of layoffs. The city was among the hardest hit by a $1.3 billion cut in state aid this year.

E.J. McMahon of the Empire Center, a conservative Albany-based think tank, called the proposal "an egregious fiscal abuse" that will bury school districts in debt for years to come and render useless a 2-percent cap on property tax increases that also passed last week.

"If passed, the bill will not only push higher pension costs well into the 2020s and compound them with high interest charges, but it will also represent a massive breach of the tax cap," McMahon said.

But the measure would also allow school districts to capitalize on historically low interest rates. Carl Korn, a spokesman for New York State United Teachers (NYSUT), the state's largest teachers' union, said borrowing is a last resort for distressed school districts and the option should be made available before interest rates increase.

"Every good businessman knows the time to borrow money is when interest is low," Korn said. "Borrowing will save programs and jobs now."

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Here's a look at what our local lawmakers were up to between June 17 and June 24. The legislative session ended in historic fashion, with the legalization of same-sex marriages, a 2-percent cap on property tax increases, expanded rent control laws and a number of smaller measures.

Assemblyman Tom Abinanti (D-Greenburgh) introduced a bill that would limit annual growth in pension contributions for local governments and school districts to the lesser of 2 percent or the rate of inflation. Pension obligations that go beyond that cap would be picked up by the state. The bill, which is co-sponsored by Assembly members Bob Castelli, Ellen Jaffee, Steve Katz, George Latimer and Amy Paulin, came one day before legislative leaders announced an agreement to cap annual property tax increases at the same levels. The enacted cap includes an exemption for pension contributions.
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Assemblyman Bob Castelli (R-Goldens Bridge) recently penned an op-ed, along with Scarsdale Police Chief John Brogan, that frames greater investment in early childhood education as a key to fighting crime. "If we can reach young children with help through early intervention, we can set them on a better path that leads toward a law-abiding life, instead of a prison bunk," the pair wrote. Castelli also used the opportunity to call for passage of a bill that would require daycare centers and pre-schools to implement a state-run evaluation system.

Harrison Patch Editor , sponsored by Castelli and Sen. Suzi Oppenheimer, that would save the town and village of Harrison money by allowing non-police employees to have greater powers as court officers. Harrison's police chief said the bill, if signed into law by the governor, would free up police resources as well.
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Assemblywoman Sandy Galef (D-Ossining) announced Assembly passage of a bill that would allow the legislature to go 'paperless' by amending the constitutional requirement that bills be printed and placed on lawmakers' desks prior to a vote. Instead, legislators would be able to view the bills electronically.

Galef applauded the passage of a bill that allows the town and village of Ossining to merge their respective courts, which are currently housed in the same building. The measure, sponsored in the Senate by Suzi Oppenheimer, was requested by local officials in a bid to save money. Village Mayor Bill Hanauer said the merger would be effective Jan. 1, 2012.
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Assemblywoman Ellen Jaffee (D-Suffern) was among the speakers at a meeting in Cortlandt this month held to probe safety issues at the Indian Point nuclear power plant. Jaffee is a staunch opponent of the plant, and recently sponsored a resolution calling for federal regulators not to renew the plant's license when it expires in 2013. The meeting reportedly became raucous at times, with Indian Point opponents shouting "Liars!" at representatives of the federal Nuclear Regulatory Commission.
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Assemblyman Steve Katz (R-Yorktown), who has pushed for "green jobs" legislation throughout his first year in Albany, applauded the June 22 passage of the Power NY program, which will allow the state to grant home improvement loans. Homeowners will pay off the loans as part of their utility bills. The Power NY bill also includes the renewal of a law, which expired in 2003, that streamlines the process for building new power plants. Supporters, including Katz, say both provisions will help create jobs.
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Assemblyman George Latimer (D-Rye) won Assembly approval of a bill that would steepen the penalties for broadcasting on a "pirate" radio station. The measure has passed the Senate a number of times, including this year, but has never passed the Assembly. The bill would make operating a radio transmission on AM or FM frequencies a class A misdemeanor; subsequent infractions would be treated as felonies and punishable by incarceration and fines of at least $10,000.
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Assemblywoman Amy Paulin (D-Scarsdale) applauded the Assembly's passage of a bill that would prohibit any person convicted of misdemeanor or felony domestic violence from purchasing or owning a gun. Paulin pointed to an incident in Poughkeepsie earlier this year in which a man shot and killed his ex-girlfriend and a police officer. The man had previously been convicted of abusing the woman. The bill has already passed the Senate and is expected to be signed by the governor.
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Assemblyman Ken Zebrowski (D-New City) announced Assembly passage of a bill he sponsored that would expand the state's "Move Over" law, which requires drivers to change lanes or slow down when approaching stopped police cars, ambulances or fire trucks on the highway. The bill would add all "hazard" vehicles, including snow plows, highway assistance trucks and letter carriers, to the law. The bill passed the Senate in March.
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Sen. Greg Ball (R-Patterson) introduced a bill that would require environmental officials in New York City and Albany to conduct a review and make recommendations to mitigate flooding in areas west of the Hudson River. In a bill memo, Ball cited a disastrous 2005 flood that destroyed homes and killed at least one person.

Westchester County Board of Legislators Chairman Ken Jenkins sent a letter to Ball last week accusing him of stalling a bill that would allow the board to appoint a non-voting member to the county's Industrial Development Agency. The board wants some oversight at the IDA, a quasi-governmental agency that provides tax breaks and other sweeteners to businesses who create jobs in the area. Jenkins, a Democrat, went on to accuse County Executive Rob Astorino of working "behind the scenes" to convince Ball to stall the bill in his chamber. The Assembly passed the proposal on June 15.
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Sen. David Carlucci (D-Clarkstown) was featured in the latest installment of the Senate's "Legislative Report" video series. The 15-minute clip touches on a number of issues, including ethics reform, the MTA payroll tax and a bid to rein in auto insurance fraud.

Carlucci was the latest state lawmaker to be ribbed by Daily Show host Jon Stewart. In a bit that aired June 23, Stewart criticized the Senate for taking up, among other things, a bill to designate an official state vegetable while putting off a vote on same-sex marriage. The segment featured a clip of Carlucci, who has lobbied for the onion to win the designation, talking on the Senate floor. The freshman took it in stride, tweeting on June 24 that he's a "big Jon Stewart fan," and adding that he agreed the Senate should vote on the marriage bill.

And speaking of gay marriage, Carlucci penned a June 20 op-ed on Nyack News & Views in support of the measure. Carlucci said it was a great honor as Clarkstown town supervisor to officiate over hundreds of weddings, and that gay New Yorkers - "our friends and neighbors, our colleagues, our family and our loved ones" - deserve the same right.
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Sen. Suzi Oppenheimer (D-Port Chester) introduced a local bill that would allow the town of Rye to expedite its review of property tax assessment grievances. The town recently reassessed all of its properties, and says it needs the measure in place in order to sort through a large number of grievances, known as certiorari cases.

The Senate on June 23 passed a bill, sponsored by Oppenheimer, that would allow New Rochelle to extend through 2013 an additional 1 percent sales tax. The bill has also passed the Assembly, where its sponsor was George Latimer.

A class of Purchase fifth graders were given the assignment of . The two best portraits were presented to Oppenheimer earlier this month.
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Both houses last week passed a bill sponsored by Sen. Andrea Stewart-Cousins (D-Yonkers) that she said will save local governments money and local residents time by allowing land documents, such as deeds and mortgages, to be recorded electronically. The bill, sponsored in the Assembly by George Latimer, was originally requested by Westchester County Clerk Timothy Idoni.

Joanne Mays Becker July 03, 2011 at 10:07 PM
The problem is that the majority of municipal pensions are still defined benefits plans (when Corporate America is predominantly on defined contributions and 401K/As), municipal contracts obligate the paying entity/ies for multiple years and pension obligations of municipal employees are guaranteed under the New York State Constitution. Substantial losses were taken in 401K/As in 2008 when the market collapsed. However, for NY municipal employees those losses are guaranteed by NY taxpayers. The shortfalls must be covered within a defined time span.
Bjorn Olsson July 04, 2011 at 02:45 AM
Kind of shows how crappy the 401(c)(3) concept is compared to real pensions.
Joanne Mays Becker July 04, 2011 at 02:00 PM
Tried the lease the following yesterday but it would not upload! The "Solution" is a Bill that would allow the shortfall to be funded immediately through the issuance of debt which would be repaid over a 15 year (in excess of what is currently permitted) period. Debt service payments would over that 15 year period reduce the monies available to pay all other expenses. Especially given forecasts of further declining revenues (and unemployment doesn't seem to be decreasing), the situation would be worsened. It would allow the issuance of debt to pay what is an operating -not capital- expense. There is an old saying about taking a bad situation and making it worse! Additionally, we should ask whether it would circumvent the spirit -at least- of requiring a Balanced Budget and debate whether a population that is generally employed at risk (no employment contracts) and whose retirement funds are at risk (defined contributions and investment returns might not be sufficient to provide for retirement) should subsidize a group that does not bear those risks. Contractual obligations should be met, but in future the terms need to be renegotiated as the reality is that this can no longer be afforded . In the 1950s there were 15 workers per retiree and that has declined to approximately 6 and is forecast to decllne still lower. Like families, governments must live within their means. Kudos to Governor Cuomo for facing Reality and announcing he intends to veto the Bill!
Meredith Lesly July 04, 2011 at 03:03 PM
Thanks for the explanation!
Meredith Lesly July 04, 2011 at 03:14 PM
Quoting towny below, "Most, not all, munincipal pensions for new hires - as of a couple of years ago - are mandated 401k's. Defined benefit has been grandfathered in for the rest." As you probably know, many pension funds, including the one in question, lost money due to the meltdown. That has nothing to do with things being actuarily unsound, nor should the people whose pension comes out of the fund be punished for the state's mismanagement.

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