Cuomo, Legislature Destroy State Pension Funds

New Jersey here we come:

ALBANY—State lawmakers are moving ahead with a plan to defer more than $1 billion in pension payments over the next five years, arguing it will help them hold the line on spending increases even as critics warn of long-term risks.

Governor Andrew Cuomo, a Democrat, proposed another five years of “pension amortization” in his proposed $141.6 billion budget, the state's most recent financial plan shows. He's continuing to utilize a program first enacted in 2010, when the state government and municipalities were socked with a spike in required pension obligations to make up for stock market losses related to the 2008 stock market crash.

In New York, public employee pensions are paid from a handful of funds managed by Comptroller Tom DiNapoli. (A separate fund handles teacher pensions.) Employers—a village, county, or the state itself—are required to pay a contribution that is inversely related with the fund's performance, rising after years when the $181.7 billion fund posts a piddling return.

The amortization program lets them defer a portion of their bills and pay them back over 10 years, at interest rates between 3 percent and 5 percent, a move critics say is akin to borrowing. Dozens of municipalities have used the program, holding their short-term costs down to prevent tax hikes or reductions in other services.

The state has deferred $3.2 billion in payments since 2011, and was set to stop borrowing this year. The budget division reversed course in October, after DiNapoli's office announced it was adjusting the way contributions are calculated to reflect longer lifespans.

Cuomo's spending proposal includes another five years of amortization, including $395.1 million in the upcoming fiscal year. Members of both the State Senate and Assembly accepted the idea in their one-house budget resolutions.

So what's the problem with this plan?

This:

Critics said there was no reason to borrow the money this year because the state has gathered a $5.4 billion cash surplus from one-time settlements with major financial institutions.

Elizabeth Lynam, director of state studies for the Citizens Budget Commission, said use of the program was no longer warranted.

“It's a bad idea,” she said. “Anything we do to postpone payment, to defer payment, puts those funds in jeopardy. New York is a bright spot—we're pretty well funded—and we don't want to start down the slippery slope to a situation like New Jersey or Illinois where we don't have the funds to meet our obligations.”

And this:

The C.B.C., a business-backed group, estimated that the state's deferrals have already resulted in $144 million in interest costs. That figure will run to $780 million if the borrowing continues.

They're setting up where pensions are going to cost a lot more than they would if they just made the pension payments rather than deferring them and paying nearly a billion dollars in interest.

You can bet we'll hear in about five to ten years how pension costs have skyrocketed, funding ratios have plummeted and cuts will need to be made to existing and future pensions in order to handle the shortfalls.

That's the goal behind this plan from Cuomo - to manufacture a "pension crisis" and force drastic cuts to the pension system in future years.

And our "friends" in the legislature are happily going along with it.

Governor Cuomo And The NY Post - In Search Of A Pension Crisis That Doesn't Exist

Guest Post By Harris Lirtzman, former Director of Risk Management for the New York City Retirement Systems in the NYC Comptroller's Office from 1996-2002 and former Deputy State Comptroller for Administration from 2003-2007.

A few fun pension facts may be useful before teachers all over the City start pulling their hair out over comments made recently by Governor Cuomo or the New York Post about teachers' pensions.

New Jersey, Illinois, Michigan and Rhode Island are the states with the most significant actual pension problems, verging on "crises," caused almost entirely by years and years of the state failing to make mandated minimum employer contributions to keep their pension systems solvent.  New York State and New York City are awash in cash as tax revenues from soaring sales of residential and commercial properties roll in and personal income and sales tax proceeds exceed every recent projection and are making current contributions to their pension plans.

In 2013, the New York City Teachers Retirement System (TRS) was funded at approximately 63% of accumulated retirement benefit obligations and earned 11.9% on its $38.3 billion investment assets.  In 2013, The New York State Teachers Retirement System was funded at approximately 88% of accumulated pension obligations and earned 13.7% on its $82.7 billion investments assets.  There is no pension "crisis" in New York City or New York State that would warrant, even by the Post's own credulous standards, the sort of panic that such an article will engender.

No politician in New York City or New York State will take on public pension fund systems directly by attempting to reduce the benefits paid to current retirees or accruing to current employees.  They cannot do that because pension benefits are a constitutional obligation of the State of New York and a contractual obligation of the City and State as employers.

The only time that a state constitutional protection has been abrogated other than by some change in the constitution itself occurred two years ago in Detroit, when a federal bankruptcy judge, relying on long-standing precedent, ruled that the Michigan State constitutional protection against the diminishment of already accumulated pension benefits does not apply when a municipality of the State, in this case, Detroit, declares bankruptcy.

We all need to remember that even during the fiscal crisis of the 1970s, New York City did not go bankrupt.  It came very close to missing a payment that would have triggered a default on its bonds (which is very different than bankruptcy) but it did not miss that payment partly because the City's very own pension funds agreed to help the City make that payment and avoid bankruptcy.

There is some concern that our pensions will be put at risk if the referendum in 2017 about convening a state constitutional convention passes but the referendum in 1997 failed 62-38% and there are other reasons to doubt that the next referendum will succeed—the primary one being that even the folks whose purposes may be served in part by calling a convention are likely to fear the larger damage that a convention might cause them.

The really important question that New York City teachers should be asking themselves, and should be asking the three UNITY members who sit on the TRS board, is why the City and State funds, both operating under the same state laws and regulations, have such different funded ratios and investment returns.  A teacher who works for the City has a pension benefit that is only three-quarters as secure as a teacher who works anywhere else in the State and belongs to a pension system that earns 13% less a year less on its investments than does the State system.  The answer is complex but in its simplest form will be instructive to anyone who wonders exactly how the UNITY caucus manages the oversight of our pension plan: the UNITY board members agreed fifteen years ago to a pension accounting gimmick that allowed the Giuliani Administration to grab some of our pension funds in return for a short-term gain for members but which put the City TRS at a long-term structural disadvantage compared to the State TRS where no pension grab ever occurred.

The argument will now regularly be made, and the Post, as usual, is in the vanguard, that there is a "pension crisis"--just as the education reformistas set up the public for their privatization of the public education system by creating an "education crisis" as far back as 1983 with the publication of "A Nation at Risk."  The "pension crisis" will be framed as "You, the people of New York City and State, have a 'pension crisis'.  You cannot afford to pay both the annual employer contributions required to keep the pensions of your greedy public employees agreed to by your grasping public officials funded at reasonable levels and the current costs of government, especially police, fire, sanitation and other public health and safety obligations.  You must now make a choice and you must choose your own current welfare." 

Short of the bankruptcy of the City or the State, those of us who already belong to anything up to Tier 4 have a full defined benefit pension plan.  Tiers 5 and 6 have all the trappings of a defined benefit plan but are not nearly as comprehensive.  The next two or three tiers, which will come in rapid succession, are likely to begin the transition from defined benefit to defined contribution retirement plan so that the unlucky new employee covered by a Tier 10 will have nothing to show for 40 years of public employment.

The "pension crisis" generation machine is revving up.  If teachers and other public employees and their unions are as feckless in the protection of their pensions as the UFT and NYSUT now are in their battle with Andrew Cuomo and the "reformistas" then they will deserve to lose their pensions and they will lose them.

Cuomo Employs Shock Doctrine To Blow Up New York's Public Education System

You claim the following:

The fact that only about one third of students are proficient on state tests in math and language arts was “simply unacceptable,” the letter said.

In fact, the test scores were rigged by NYSED Commissioner King and Regents Chancellor Tisch so that only one third would be "proficient."

Here is Diane Ravitch from 2013 on that rigging:

New York City’s chief academic officer–a testing zealot–here announces that scores will plummet on the new Common Core tests administered last spring for the first time. They will plummet because the state decided to align its standards to NAEP, which are far more demanding than those of any state.

Over the years, many researchers have maintained that the NAEP achievement levels are “fundamentally flawed” and “unreasonably high.” If you google the terms NAEP and “fundamentally flawed,” you will find many articles criticizing the NAEP benchmarks. Here is a good summary.

What you need to know about NAEP achievement levels is that they are not benchmarked to international standards. They are based on the judgment calls of panels made up of people from different walks of life who decide what students in fourth grade and eighth grade should know and be able to do. It is called “the modified Angoff method” and is very controversial among scholars and psychometricians.

Setting the bar so high is one thing when assessing samples at a state and national level, but quite another when it becomes the basis for judging individual students. It is scientism run amok. It is unethical. It sets the bar where only 30-35% can clear it. Why would we do this to the nation’s children?

Nonetheless, these “unreasonably high” standards are now the guidelines for judging the students of Néw York.

Consequently, teachers and parents can expect to be stunned when the scores are released.

The good news is that teachers and schools will not be punished this year. The punishments start next year.

This is Shock Doctrine in action from Andrew Cuomo and the so-called education leaders in this state.

They artificially lowered the scores by increasing the "rigor" of the tests (done before any of the new curriculum for the new tests was developed, btw), now they claim the lowered scores are reason for why they must blow up the school system and radically "reform" it.

They created the problem, now they use it to push through the policies they want anyway (i.e., school privatization.)

Suburbia Is Where Education Reform Comes To Die

There has been a huge backlash come Arne Duncan's way for a speech he gave to a group of state superintendents in which he blamed recent Common Core criticism on white suburban moms who find their child "isn’t as brilliant as they thought."

Duncan has faced a storm of criticism on Twitter over the comments, with Carol Burris summing up many of the attacks with her own criticism of Duncan:

@arneduncan I think you need to apologize. Moms are smart enough to oppose the CC on merits. It is not about their egos. Awful.
— Carol Burris (@carolburris) November 17, 2013

While there is a lot of outrage over Duncan's comments, he's simply voicing thoughts many education reformers are having these days.

As I pointed out in this post yesterday, what Arne Duncan told this group of state superintendents comes straight from the Ed Deform Shock And Awe Playbook as given to us by AEI fellow and Education Week blogger Rick Hess.

The plan was always to try and shock suburbanites into believing that their kids' schools were terrible, as bad as the urban schools deformers have already targeted for reforms, and create a clamor for the same kinds of reforms in suburban schools.

Hess dubbed this plan the "Common Core Kool-Aid," and wrote that he was dubious that it would work:

After failing miserably to convince suburban and middle-class voters that reforms designed for dysfunctional urban systems and at-risk kids are good for their children and their schools, Common Core advocates now evince an eerie confidence that they can scare these voters into embracing the "reform" agenda. And this conviction has become the happy Kool-Aid that allows would-be reformers to ignore the fact that they're not actually offering to tackle the things (like access to exam-style schools, world language mastery, music and arts instruction, and so on) that suburban parents are passionate about.

Hess raises some salient points for why the Ed Deform Shock And Awe Playbook would not work the way deformers thought it would in the suburbs.

After all, parents can see the quality of their kids' schools and teachers and while neither are perfect they are in no way "dysfunctional" or failing.

Also, suburban parents are less likely to get on board the No Excuses Charter Express and push for suburban schools to turn into test prep factories like Eva Moskowitz's Success Academies or the KIPP schools.

The linchpin for convincing suburban moms and dads that their kids' schools and teachers suck and radical reform was needed to right things was always the Common Core test scores.

New York was the second state to roll out the Common Core tests (rolled out even before the Common Core curriculum was fully developed) and the state education commissioner and Regents chancellor both evinced an eerie confidence that kids were going to fail these tests in large numbers long before the tests were even given.

It was as if they knew large numbers of kids would fail because they planned to set the cut scores to a level that would ensure large-scale failure.

And last summer, sure enough, NYSED Commissioner King and Regents Chancellor Tisch happily announced that 70% of children around the state had failed to reach proficiency on the state tests and radical reform was needed to right the public education ship.

Luckily for all of us, they had rolled out a reform agenda that included more testing, teacher evaluations tied to testing, a sped-up Common Core implementation and possible state takeover of failing schools and even districts, so all would be well if we would all just jump on board the SED/Regents Reform Express.

The only problem was, suburban moms and dads were not only not convinced by the Common Core test scores that their children weren't reading or doing math at or above grade level, they weren't convinced that their children's schools were failing or their teachers were ineffective either.

The Common Core test scores underscored the uneasiness about the Common Core standards many parents were feeling, as their children came home with math homework that parents couldn't help them with because they could understand it or hid under the bed and feigned illness because they didn't want to go to school anymore and do the drudgery of the Common Core lessons.

The uneasiness over the Common Core standards, coupled with the anger over the Common Core cut scores, exploded into mass protests in NY State that finally made headlines in the media when NYSED Commissioner King got verbally abused in Poughkeepsie last month at a Common Core town hall meeting.

King canceled future town halls after the Poughkeepsie mess, but was forced to add additional town halls when the furor over the Common Core grew.

Since then, King and Regents Chancellor Tisch have met criticism over the Common Core standards, the Common Core tests, the state teacher evaluation system that mandates so much of this testing, and the state data collection project that will hand student information over to Bill Gates and Rupert Murdoch whether parents want that to happen or not.

King and Tisch have said repeatedly that they are listening to the criticism, hearing what parents are saying, but that nothing will change in the way the state implements the Common Core or pushes "full speed ahead" with the SED/Regents reform agenda.

Deformers got little resistance to their reform agenda so long as it was aimed at black and brown children in urban districts.  But once they set their sights on suburban districts, on children in schools in places like Scarsdale and Great Neck, East Setauket and Mineola, the deformer assault on public education met resistance.

It seems deformers did not envision that the challenges would be as tough and resistant to their propaganda as they have turned out to be.

Every meme the deformers churn out, from the "Schools are failing and your kids cannot compete in a 21st century global economy" to "The Common Core tests demonstrate just how bad your schools are and how ineffective your children's teachers are," has failed to convince parents in the suburbs that they need the No Excuses Charter Express to roll into their town and take out the schools and teachers on a fast track to oblivion.

In fact, the more Duncan, King, Tisch and their fellow reformers try and convince suburban parents here in NY State and around the country that the Common Core standards are good for their children, the Common Core tests are reliable measures of what students should know, teachers should be evaluated based upon these test scores and fired if found wanting, and all this data needs to be collected and collated and handed over to third party vendors for the improvement of future instruction, the larger the movement against the reforms grows.

In the end, the eerie confidence Rick Hess described deformers demonstrating as they talked about their plans to prove to suburban parents that their children's schools were failing and radical reform was needed to improve the system turned out to be delusional.

The reactions we are seeing from deformers - Arne Duncan insulting "white suburban moms" or John King getting shrill in the face of criticism in Poughkeepsie - is symptomatic of a reform movement that until now has had everything go their way but now that challenges to their success have arisen, they have no back-up plan to sell their agenda.

I wrote yesterday that

the evidence is in already as the anti-Common Core movement grows and grows by the month - parents aren't buying the ed deform snake oil Uncle Arne and his fellow corporate ed deformers are selling and I just don't think insulting "white suburban moms" to get on board with the Core is going to save the sinking ed deform ship.

Let me double down on that statement from yesterday.

Arne's criticism of white suburban moms stems from frustration over the challenges he and his deform movement are now facing as they attempt to do to the rest of the country what they have down to D.C., New Orleans, Detroit and other inner cities.

It is also evidence that Duncan and the deform movement are flailing and have no idea what to do to put their reform movement back on the fast track to success.

Taking the deform movement to the suburbs, deformers have met their matches in suburban moms and dads who see through the snake oil the deform movement has been trying to sell them.

In short, the Shock And Awe that the reformers planned for the suburbs has been turned back on them.

Bloomberg Plans To Lease NYCHA Land To Private Developers To Get Money For "Repairs" In The Projects

In between his rants about stop-and-frisk and his belief that all NYCHA people should be fingerprinted, the mayor said he's going forward with NYCHA privatization plans:

During his radio show today, Mr. Bloomberg also announced this morning that the city plans to move forward today with a controversial plan to open NYCHA land for private housing development to raise extra money for repairs.

“We have to come up with some revenue-generating mechanism,” he said. “Either we walk away from our public housing, or we find some ways to make it better … We don’t have a printing press. We’ve gotta find some rational ways to do it.”

He wants a rational way to raise money to fix NYCHA buildings?

How about the old-fashioned way - raise taxes on billionaires and use the money to fix NYCHA buildings and the rest of the city infrastructure that's falling apart.

But oh no, can't do that - raising taxes on billionaires is unthinkable to our billionaire mayor, so instead he is going forward with a "revenue-generating" plan to lease some NYCHA land to private developers in order to "repair" NYCHA buildings on other parcels of land.

And of course the NYCHA land Bloomberg will eventually try to open to real estate developers will be in parts of the city where real estate values are high and land is tight.

Like the Lower East Side.
Maybe Williamsburg.

Maybe near Lincoln Center.

Oh, yeah, you can see the real estate developers licking their lips at these parcels of land opening up to development - and the eventuality that all NYCHA land will be open to them.

Classic Shock Doctrine stuff - Bloomberg's not missing a trick to privatize as much as he can on his way out the door to Bermuda.

Tests As Shock And Awe

Leonie Haimson weighed on what the education reform establishment is doing with by rigging the scores to dramatically fall: 

So why are King, Arne Duncan, Joel Klein and the billionaires like Bill Gates and Rupert Murdoch who are pulling the strings, so determined to prove that more that 69% of the students throughout New York State are failing?  This is the Shock Doctrine at work.  Naomi Klein has observed that when you scare people enough, it is easier to persuade them to allow you to make whatever radical changes you want, since the status quo will be perceived as so disastrous. In the case of these men, they would like to convince parents that their corporate agenda, including a steady diet of developmentally unsound standards, the Common Core’s rigid quota for “informational text” and overemphasis on testing,  and their favorite policies of closing schools and firing teachers based on test scores, expanding charter schools and online learning, data-mining and outsourcing educational services to for-profit vendors will somehow improve the quality of education in our state, even though there is little or no evidence for any of these policies.  

And Leonie reminds us that it is King who set the bar for the scores and that bar is an arbitrary one:

The truth is that the new cut scores that determine the different proficiency levels on the state exams – which decide how many kids “pass” or are at Level 3 and 4 -- are arbitrary and set by Commissioner King.  He can set them to create the illusion that our schools are rapidly improving, as the previous Commissioner did, or he can set them to make it look that our public schools are failing, as King now is doing, to bolster support for his other policies.

       The primary evidence that Commissioner King now bases his overly-harsh cut scores upon is that the results are mirror the percent of students who test “proficient” or above on the NAEPs.  Yet while the NAEPs are reliable to discern trends in test scores, because they remain relatively stable over time, the cut scores that determine the various NAEP achievement levels are VERY controversial. See Diane Ravitch on how the NAEP’s benchmarks are “unreasonably high”; or this article that reveals that even the National Academy of Sciences has questioned the setting of the NAEP proficiency levels, and how many experts believe that level 2 on the NAEPs – or basic -- should be used instead to estimate which students are on track for college:

Fully 50% of 17-year-olds judged to be only basic by NAEP ultimately obtained four-year degrees. Just one third of American fourth graders were said to be proficient in reading by NAEP in the mid-1990s at the very time that international assessments of fourth-grade reading judged American students to rank Number Two in the world.

Despite running a pretty good report, WABC 7 didn't get to the real meat of the story:

The tests were rigged to make the state's schools look bad, to make teachers look bad, to make students look bad, because there is an agenda at work here - the Shock Doctrine.

Bloomberg Gives Millions In Property Tax Breaks To Wealthy While Calling For Layoffs And Budget Cuts

The Shock Doctrine New York City/Bloomberg style continues unabated.

As two bills were introduced into the state senate and assembly to help Mayor Bloomberg lay off off thousands of teachers at will because city finances are in such bad shape, the Daily News' Juan Gonzalez reports on property tax breaks Bloombgerg gives for luxury condo owners that costs the city $900 million a year:

Yankees star Alex Rodriguez will pay virtually no property tax for a $6 million apartment he is buying on the upper West Side.

Rodriguez will be billed around $1,200 this year in real estate tax for his 3,000-square-foot, five-bedroom penthouse with spectacular views of the Hudson River.

Over the next 10 years Rodriguez and his fellow residents will continue to receive huge discounts on their tax, a city housing official said.

For Rodriguez, a full tax bill would be at least $60,000 annually, the latest city assessment records show.

A spokeswoman for Extell, the company that built the 2-year-old luxury Rushmore Towers near the West Side Highway, declined to discuss the taxes on the slugger's new bachelor pad.

But the only two penthouses that went into contract this month at the Rushmore, each of which was listed at more than $6 million, have been assessed at a little over $100 per month in taxes, one real estate expert told the Daily News.

So how is it possible that tens of thousands of ordinary city residents struggle each year with soaring tax bills for their co-ops, condos and homes, while the Yankees' $33-million-a-year star gets to pay next to nothing?

Well, Rodriguez and many other well-heeled New Yorkers have learned to take advantage of a little-known tax abatement program that has existed for decades.

The politicians and real estate insiders call it the "421A" program. It grants as much as a 98% percent tax abatement for up to 25 years to condo owners in newly built housing.

The bulk of the 421A benefit has gone to luxury housing in Manhattan, though a few reforms by City Hall and the Legislature in 2007 at least required developers to build 20% affordable housing to qualify for the tax abatement.

This year alone, the 421A program will cost our city more than $900 million in lost revenues, the Independent Budget Office says.

That's money that could prevent layoffs of firefighters and teachers. That could fund senior citizen centers and pay for after-school programs.

You haven't heard much about this, but the 421A program ended in December for any new construction. But the city's powerful real estate industry is determined to get it renewed and even get it expanded. Its lobbyists are working feverishly behind the scenes to pressure Council and lawmakers in Albany.

Brooklyn City Councilman Brad Lander has been leading the fight against that renewal.

It's too much of a giveaway to developers, Lander says, especially since there's already a glut of luxury housing in this town.

The developers want to link any extension of rent stabilization laws for tenants, which the Legislature must vote on by June, to a deal on extending the 421A tax abatement for builders.

The industry hopes Gov. Cuomo, who made a name for himself a long time ago as an advocate for affordable housing, will take their side.

In so many ways, big and small, the minority who have the big money keep trying to get government to give them more financial breaks at the expense of the rest of us.

"Where's the fair share if people who have paid millions of dollars for an apartment get away with paying no real estate taxes, when people in co-ops are being slaughtered?" said Bayta Lewton, of the Coalition for a Livable West Side.

Even before the pennant race begins, A-Rod has become the poster boy in another race - to end these tax abatements that have run amok.

Outrageous.

But you can bet that Bloomberg and his real estate cronies (remember Deputy Dan Doctoroff?) will be working overtime to get the tax abatement for rich people extended.

They will argue that this MUST happen or new construction won't take place in the city.

Meanwhile, crying poverty, Bloomberg is closing 20 senior centers, laying off thousands of teachers, and slashing other programs to the bone in the spirit of fiscal prudence.

Hey, Bloomie, you want to be fiscally prudent?

Support the extension of the millionaire's tax in Albany and the end to the tax abatement giveaway to wealthy condo owners.

Both of those moves will bring in an extra $1.25 billion to the state and an extra $900 million to the city.

And then you wouldn't need to do layoffs at all, would you?

But I bet you WANT to do layoffs and are using this supposed financial crisis the city is in to push through your corporatis,t right wing, union-busting agenda.

Just as Paul Krugman notes the Bushies did in Iraq back in 2003 and the Repubs are doing in Wisconsin right now.

Shock Doctrine Bloomberg-style.