Was the non-defense of the UFT at grievances and in 3020-a a secret side-deal between the Department of Education and the UFT?
Betsy Combier
betsy.combier@gmail.com
Editor, NYC Rubber Room Reporter
Editor, Parentadvocates.org
Editor, New York Court Corruption
Editor, National Public Voice
Editor, NYC Public Voice
Editor, Inside 3020-a Teacher Trials
Teachers are juicing their pensions, and it cost you $1B
 |
| UFT President Mike Mulgrew, NYC Mayor Bill deBlasio, Chancellor Carmen Farina |
A little known pension perk available only to New York City
teachers cost taxpayers an astonishing
$1.2 billion last year, a watchdog group
reported Wednesday.
The
sweet deal guarantees that teachers who sock away money for retirement in a
special Tax Deferred Annuity (TDA) receive a 7 percent annual return. In stark
contrast, banks currently pay depositors just 1 percent or less on most savings
accounts.
And
city taxpayers are the de facto guarantors for the high rate of return — on the
hook to make up the difference if the annuity falls short of the guarantee.
Knowing
a good thing when they see it, increasing numbers of teachers are stashing
their cash in the no-lose annuity, the Citizens Budget Commission found.
It
said that there are now 137,000 participants in the plan, including 51,000
retirees. But only 3,000 are drawing on their funds.
The
rest, according to the commission, are watching their nest eggs grow at a fixed
rate available to no other city employee.
And
that’s over and above the teachers’ regular pensions.
“You
don’t get a guaranteed rate of return with your 401(k). But teachers do” in
that special annuity, said CBC research director Charles Brecher.
“It’s
a good, positive math lesson for teachers. It’s a bad, negative math lesson for
taxpayers. The teachers get this huge taxpayer subsidy. The city should treat
the teachers like everyone else.”
Former
city labor director James Hanley said the guaranteed 7 percent — which he
negotiated down from 8.25 percent in 2009 — is indefensible.
“Nobody
else has such a system. This is a little ridiculous. It’s tough to sustain in
the long term,” Hanley warned.
The
annuity is a voluntary program to supplement traditional government pensions.
Other
city employees have them — without the guaranteed 7 percent return.
The
sweet deal kicked in when the state Legislature in 1988 allowed teachers to
designate all or part of their pension contributions to the fixed-return fund,
which at that time was paying 8.25 percent, then close to the return of
federal-government bonds.
After
the 2008 stock-market crash, the fixed-rate option grew in popularity. In 2007,
the annuity fund stood at $7.4 billion. Last year, it held $18.7 billion.
Taxpayer
subsidies have also grown, from $238 million in 2007 to $1.2 billion last year.
The
CBC urged the city to end the 7 percent guarantee, particularly for new hires.
The
CBC pointed out that while government pensions are protected by the state
Constitution, the annuity isn’t.
Any
changes would require taking on the powerful teachers union.
Mike
Mugrew , president of the United Federation of Teachers, argued that taxpayers
have actually come out ahead.
“The
CBC report neglects to mention that over the last 25 years, the city has
actually made a profit from this fund, since its investment returns over that
period have exceeded the guaranteed rate of return promised by the TDA,” he
said.
Mayor
de Blasio’s office had no immediate comment.
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