55/25: A (Long) History and (Short) Possible Future

Ah, the NYS budget season. The most interesting drama packed time of the entire year! Ain't New York State politics something? 

Who could forget last season's *almost* legalization of Marijuana? Or the season before that, which gave us our new (new) teacher evaluation system? Or the one I wrote about way back in 2012 which, again, addressed a then pending teacher evaluation system through a mayoral announcement that no city unions would be offered a contract (good crazy time under Mike Bloomberg. Good, crazy times.)? My personal favorite is the 2015 season. That was a doozy. It one gave us (yet another) teacher evaluation deal and allowed us to all watch, popcorn in hand, as the governor dethroned a long time New York State Pol   (Mr. Silver; we still miss you).

Oh, the drama.
Oh, the calamity.
Oh, New York.

The scoop
This year's budget may bring back an oldie but goodie: The non-incentive-retirement-incentive. Teacher should read the papers  and their UFT email updates in the coming weeks. We may be hearing about another 55/25.


You should probably know the history of this first

In 2007, while contending with a very powerful mayor, New York City teachers were offered a stunning and seemingly generous "early retirement incentive". In exchange for allowing some teachers to submit to merit pay based on test scores, the mayor backed a plan in Albany that would allow all teachers to retire up to 5 years early (here). In exchange for paying 1.85% more toward their pension, teachers would be able to retire with a pension worth 50% of their pay (the usual rate for 25 years of service, and 10% less than it would be if a teacher had served all 30 years). All educators needed to do was sign on the dotted line and wait unit they were old to reap the benefits.

The "merit pay" part of the plan never really worked out and was very soon forgotten. At the time of the deal, Diane Ravitch told the Daily News, "The union ate the city's lunch, ...The bonus can stop ... The pension goes on forever." She was right. That's probably why the retirement incentive part of the plan -nicknamed "55/25"- quickly became the stuff legend for NYC teachers.

The news hit teacher break rooms like a wave. Colleagues tripped over themselves -and each other- in order to sign up for the chance to retire 5 years earlier than they had planned.   Every city teacher who drew breath was told by their union "this option will never be offered again. Ever. Take the deal". Most teachers, without fully understanding the details, did -and they considered themselves lucky to do it. Those who didn't, or those who became teachers after the six-month window had closed, openly complained that they had been robbed. I've seen 22 year olds in their second year of teaching complain about this and insist that the deal should be offered again. It is that popular. It is that missed.

More sober voices, like James Eterno at ICE, divided teachers into three categories from the deal, winners, no gainers and big losers. Teachers who had not yet been hired were the big losers:

Under the new system they will have to pay 4.85% for the first ten years and 1.85% thereafter but they will not be permitted to retire at 55 with 25 years of service ... Instead, the new agreement says they have to complete 27 years and be at least 55. This is why we are calling this provision a de-facto Tier V and this is how the city wins.

He was right. In future years, at the very next economic downturn, in fact, a Tier V and later a Tier VI was introduced. They both called for more money all were both that Mike Bloomberg had ever hoped and advocated for. Those teachers eventually were hired and have been complaining ever since that their retirement deal is terrible and that they, too, should be offered a 25/55.

Legend.


And Now?

The idea of 55/25 itself hasn't died in the hearts of the politicians. Not one bit. Our counterparts in the suburbs had a similar deal offered to them in 2010 with a 60 day window and pending district approval. See this legal notice update which refers to that offer.

25/55 deals were proposed in the New York Senate in 2015/16 and again in 2017/18.  And then. just last Spring, a 25/55 bill actually passed the legislature (see here).

So it comes as no surprise to me that a Facebook user's recent post to a teacher chat group mentioned that a similar 25/55 deal may be in the works for this year. It makes perfect sense that a deal may be offered during this budget cycle.

This year's budget headline is Deficit. Deficit and maybe legal Marijuana. That's it. The state government says it will be $6 Billion dollars short in its tax collections and it has some serious decision making to do.  The governor, the most powerful in my life, has stated that the deficit comes from Medicare bills that were offset by Washington DC. His plan is to offset those costs by sticking localities with the bill and it will probably work. Over the years, the governor's people have been elected as the leaders of many of these localities andso, despite Mike Mulgrew's attempt for it to not happen to his locality: NYC. I think Cuomo's influence on the local leaders will be more than enough to make it happen and to offset much of that deficit to counties.

But this will leave suburban localities in quite a jam. As Spring unfolds, local municipalities, including cities, counties, towns, hamlets (and in some scenarios even school districts) will be facing their own budget woes.

And could they possibly make up those woes? Hmm...

 Teachers who are on active duty are paid form their respective general budgets. In NYC, this is tax allocation money. Teachers who are given "incentive" to retire are paid from their respective retirement systems, thus alleviating any potential budget stress within the municipalities. And, gee, politicians have been trying to arrange another 25/55 deal for almost ten years. hmm ...

It just makes sense that a deal like this may be on the way back for this year.


Is it a good deal? 

Pffft. I don't know. I'm going to go grade some papers after I'm done writing this. Go hire a money person and ask them. All I can tell you is that the retirement system will probably be in a good enough shape to handle another 25/55 deal. Currently, the NYC TRS is in relatively good health. As of last Spring, it had $76 million on hand. That's one cool million more than it had the year before (check page 28) and that includes all of the pensions it currently has to pay, so it's not like the TRS in. NYC will l have trouble affording it.


But if it is offered, it will be a gimmick to fix a budget by offsetting certain costs related to public employees. Plain and simple. I don't ever think that's a good deal. I also won't call it an incentive. The only thing the last deal did was lift an early retirement penalty -and even at that the penalty was only lifted in exchange for 1.85% of our paycheck. I don't call that incentive. I call that bail money.