Frates on LAUSD Teacher Early Retirement
Dr. Frates was recently quoted in a Los Angeles Daily News article on the subject of 1,400 Los Angeles Unified School District employees signing up for an early retirement plan. Frates discusses the pros and cons for the district:
“With early retirement the cost is not free, and retirement benefits will be doled out for a longer period of time,” said Steven B. Frates, a senior fellow at the Rose Institute of State and Local Government at Claremont McKenna College.
“The question to ask is are the (district’s) retirement accounts robust enough to keep paying people over a long period of time?” Frates asked.
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What Steve said is obviously true but it must be weighed against the savings both tangible, decreased salary costs, and intangible, retaining talented, younger, vigerous teachers. The later although difficult to measure has a very significant value.
by Jeff Mason
on 06. May, 2009
Dr. Frates makes an interesting point, however, however his very question belies the much more serious issue of what methods and standards our municipal and government agencies should be employing in conduct of their accounting practices.
In this regard, what has CMC done by way of developing such standards of practice? And, in this specific case, does Dr. Frates have a recommended methodology or is he simply offering a comment intended to foster further dialogue?
To the untrained observer, it would seem that early retirement simply means a district accelerates its aggregate pension liability, together with current period contributions, knowing full well that it will need to replace many of the positions with new employees – the end result being an overall increase in current and future period cash flow obligations.
Does CMC have a manuual of Best Practics for use by municipalities and local governments? If not, when will one be produced?
by Doby Fleeman
on 17. May, 2009
Mr. Fleeman: The Institute does not have such a manual. It is an interesting idea for a future project, but nothing along that line is planned at this time.
Early retirement does have benefits: retirees typically take up-front money in exchange for a long-term reduction in payments (plus they get extra years of retirement to enjoy themselves). Also, the replacement staff are generally lower paid than the retiring staff. This is especially relevant in those jurisdictions that have recognized the financial disaster looming for some retirement plans and implemented changes for new hires.
by Douglas M. Johnson, Consulting Fellow
on 04. Jun, 2009
Beyond the incentive, which comes in the form of a 403b annuity paid over a minimum of 5 years, there is no implication for district “retirement accounts.” The district doesn’t pay teacher pensions – the State Teachers Retirement System does. The only retirement cost is health benefits for whatever number of additional years the employee would have worked before retiring. This may not be a large number, as many retirees would have retired this year (or next) anyway.
by AW
on 30. Jul, 2009