Tag: Unfunded retiree healthcare liabilities

NYSUT’s $544 Million Financial Problem

Over the past few months, New York State United Teachers got a lot of flack over the fact that its now-former Secretary-Treasurer, Martin Messner, was still teaching in the classroom…

Over the past few months, New York State United Teachers got a lot of flack over the fact that its now-former Secretary-Treasurer, Martin Messner, was still teaching in the classroom even as he also oversaw its woeful finances. Of course in reality, Messner had spent most of his three-year tenure as the union’s financial overlord at its headquarters in the Albany suburbs, and only began teaching again this past September after his leave-of-absence expired. [There’s also the presence of an actual staff of finance people who do the day-to-day work of balancing books.] But that brief period of double duty made for some laughs at the union’s expense.

The reality of the union’s financial condition, however, is not a laughing matter. As a Dropout Nation analysis of its latest filing with the U.S. Department of Labor shows, the union’s pension and retiree healthcare woes continue to keep it in virtual insolvency.

NYSUT reported that it accrued $544 million in pension and retiree health liabilities in 2016-2017, a 7.9 percent increase over levels in the previous year. While the union reported that pension liabilities decreased by 13.4 percent (from $288 million in 2015-2016 to $249 million in 2016-2017), retiree healthcare costs increased by 36.5 percent, from $215 million to $294 million within the same period.

As you would expect, NYSUT doesn’t have enough assets to cover those insolvencies. The union’s pension had $285 million in assets as of 2016, according to its filing with the U.S. Department of Labor. If you took that number, that still leaves $259 million in retiree pension and healthcare costs (along with other liabilities on the books), none of which would be fully covered by NYSUT’s $142 million in assets.

As with defined-benefit pensions run by states, districts, and the National Education Association (to which NYSUT is affiliated along with its status as the largest state unit of the American Federation of Teachers), NYSUT’s pension assumes an overly optimistic annual investment rate of return of 6.5 percent. Even in years in which those numbers can be made, NYSUT’s generous retirement age levels, under which an employee can head into retirement as young as age 55 with 10 years of service, adds additional strain onto finances.

The good news for NYSUT is that it is having greater success than other AFT and NEA affiliates in increasing rank-and-filers paying into its coffers. It added 35,381 rank-and-filers in 2016-2017, increasing its ranks by 5.4 percent to 686,975. This included a 7.2 percent increase in the number of classroom teachers and other school employees as well as a 2.6 percent increase in the number of retirees paying dues.

Former NYSUT Secretary-Treasurer Martin Messner got laughed at for both running the union’s finances while briefly teaching school. But the AFT affiliate’s woes are no laughing matter.

As a result of those increases, NYSUT generated $138 million in dues in 2016-2017, a 3.8 percent increase over the previous year. Overall revenue was $260 million, barely budging from last year. As you would expect, national AFT made sure to subsidize the affiliate; the $10.4 million it paid to NYSUT in 2016-2017 was 11.9 percent less than in the previous period. NEA provided $2.1 million last fiscal year, slightly less than in 2015-2016. NYSUT collected $1.8 million from its Teaching & Learning Trust, slightly more than in 2015-2016, while it garnered $6.6 million from its Member Benefits affiliate (which peddles annuities to the rank-and-file), a 5.7 percent decline.

The union did manage to hold the line on expenses. General overhead expenses of $6.4 million in 2016-2017 were three percent lower than in the previous period, while benefits costs of $43 million were just 1.4 percent higher than a year ago. As a result, NYSUT generated a surplus of $13 million, 8.5 percent lower than in 2015-2016.

Of course, NYSUT’s top honchos did fine for themselves. Andrew Pallotta, the ally of United Federation of Teachers President Michael Mulgrew who now runs NYSUT, collected $273,153 in 2016-2017, a 5.3 percent increase over the previous period. His predecessor (or, to be more-appropriate, former puppet) Karen Magee walked away with $346,080 in compensation, a 17.4 percent increase over 2015-2016. The aforementioned Messner was paid $285,684 in 2016-2017, an 11 percent increase over his compensation in the previous period. As for Executive Director Thomas Anapolis? He was paid $180,004, a 27 percent decrease over 2015-2016.

NYSUT has no interest in paying down its pension and retiree health liabilities. But it does have plenty of desire to buy influence. The union spent $97.4 million in 2016-2017 on on lobbying, contributions to like-minded groups and spending on almost-always political “representational activities”. That’s lower than the $99.6 it spent in the previous year.

The union gave $30,000 to Alliance for Quality Education, one of its longstanding vassals, in 2016-2017. That’s less than half what NYSUT doled out to the group in the previous year. NYSUT gave another of its dependents, Citizen Action of New York, even less; the $28,500 it gave to the group is 53.1 percent less than what was given in 2015-2016. The union doubled its giving to Education Law Center, handing over $100,000 in 2016-2017, while giving $250,000 to Strong Economy for All Coalition, unchanged from the previous period. NYSUT also made sure to give Labor-Religion Coalition of New York State $111,000 last fiscal year, an 11 percent increase over 2015-2016.

Advertising and messaging were the big spends for NYSUT. The union spent $296,315 with Visuality on social media efforts, dropped $21,950 on ads with Facebook, bought $5,152 worth of ads on Twitter, and put down $19,800 on ad space with Politico‘s Pro magazine to reach politicians and other players. The union spent another $84,565 on outdoor ads and public relations. Another $146,732 was spent on commercials with five outlets — public radio stations WAMC, WYNC and WXXI, as well as television stations WNYT and WWNY, which are dominate players in Upstate New York. NYSUT spent $39,150 with NGP Van, and dropped another $23,975 with Catalist, both key to the efforts of Democratic Party players.

Meanwhile NYSUT made sure to subsidize the UFT, the New York City local of AFT which effectively controls the state affiliate. NYSUT financed UFT to the tune of $14.5 million in 2016-2017, a 6.5 percent decrease from the previous period. UFT also owes NYSUT $10.8 million in accounts receivable, of which $4 million has been due for the past 90-t0-180 days. Too bad NYSUT isn’t doing much for the local in East Ramapo, whose district has been beset by a regime focused on damaging the futures of the kind of poor and minority children the union and its national parents claim to proclaim concern. The local there only received $17,240 in 2016-2017, less than the meager $17,732 it got in the previous period.

You can check out the data yourself by perusing the HTML version of the New York State AFT’s latest financial report, or by visiting the Department of Labor’s Web site.

Featured photo: Andrew Pallotta (left, with United Federation of Teachers player Shelvy Young-Abraham and AFT President Randi Weingarten), now runs NYSUT all on his own.

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NEA Loses Money

As Dropout Nation readers already know, losing money and financial woes has tended to be the norm for a good number of National Education Association’s affiliates. The Big Two teachers’…

As Dropout Nation readers already know, losing money and financial woes has tended to be the norm for a good number of National Education Association’s affiliates. The Big Two teachers’ union’s affiliates in Michigan, Illinois, and Wisconsin, along with the affiliate it controls with American Federation of Teachers in New York, have been virtually-insolvent for years thanks to unfunded defined-benefit pension liabilities, underfunded employee healthcare costs, and loss of rank-and-filers who pay the bills.

But NEA has managed to stave off such losses — until now. An analysis of its latest financial report reveals that the nation’s largest teachers’ union lost money in its last fiscal year. This can be blamed on several proverbial paper cuts that may get worse is a Supreme Court ruling hits its finances and ability to preserve influence.

NEA  lost $662,383 in 2016-2017, according to its filing with the U.S. Department of Labor. This is versus a $1.4 million surplus in 2015-2016, and a whopping $27 million surplus in 2014-2015. The loss is small compared to that of many of its affiliates (including the $4.7 million loss suffered by its Michigan unit and a $1.5 million loss for its Ohio division). But it may be a harbinger of problems to come for the national union.

One reason for the loss: A 15.6 percent increase in benefits costs (from $54 million in 2015-2016 to $63 million in 2016-2017). Contributions to NEA’s retiree healthcare trust, which covers health benefits, doubled from $7.5 million in 2015-2016 to $15.8 million in 2016-2017. The healthcare trust’s liabilities increased by 25.8 percent over the past year (from $193 million in 2014 to $243 million in 2015), according to its most-recent form 5500 filing; it only has $117 million in assets available to cover those costs if it had to close shop today.

A 6.7 percent increase in pension payments (from $20.7 million to $21.1 million) has also added to the union’s fiscal burdens. These cost increases offset a 4.3 percent decline in general overhead and 5.8 percent decrease in union administration costs. Considering that the pension expects benefit payouts to increase by 16.5 percent (from $58 million to $68 million) between 2018 and 2025, NEA’s own pension costs will increase dramatically. Especially since the pension itself is in bad shape. It doesn’t have enough assets to cover $140 million in unfunded liabilities — and it has at least $21 million in unfunded commitments to hedge funds and other private-equity investments, according to the plan’s filing with the Department of Labor. The $140 million in unfunded liabilities, by the way, is a 54 percent increase over insolvency levels in 2014.

None of this is surprising to NEA’s own staffers. Last year, the National Staff Organization, which represents the union’s workers, announced that a memorandum of understanding with NEA over fully funding the pension was suspended because “troubling challenges have developed that are making it more difficult to reach full funding by December 31, 2021”. The challenges that plague defined-benefit pensions run by states and districts that NEA wants to keep in place and keep effective control over — including overly optimistic rates of return on investments and the decline in current workers paying into the plan compared to retirees — are also a problem for the union itself.

Of course, as with AFT, NEA now offers its own defined-contribution plan, which has some $172 million in assets. But the defined-benefit pension’s woes will loom over the union’s finances for decades to come.

Meanwhile NEA isn’t growing its rank-and-file numbers enough to offset these costs. The union added 18,985 rank-and-filers and agency fee payers to its ranks in 2016-2017, according to its disclosure to the U.S. Department of Education. That equates to an anemic six-tenths of one percent increase over levels during the previous year. Anemic as those numbers are, at least NEA can say that it has increased its ranks for a second consecutive year.

Much of that growth can be credited to NEA’s joint affiliate with AFT in Florida, the Florida Education Association. Rank-and-file numbers increased by 2.8 percent (from 128,485 in 2015-2016 to 132,055 in 2016-2017). Another growing affiliate: The Ohio Education Association, which increased its rank-and-file by 1.4 percent (from 121,782 to 123,453). Growth for both affiliates offset nonexistent increases for other affiliates as well as the continued woes of NEA’s Wisconsin unit and the Michigan Education Association (whose rank-and-file numbers declined by 2.8 percent over the same period). Thanks in part to the growth, NEA collected $370 million in dues last fiscal year. That’s a nine-tenths of one percent increase over 2015-2016.

But trouble looms over the horizon. If the U.S. Supreme Court strikes down compulsory dues laws (and the ability of NEA and other public sector unions to force employees to pay into its coffers even if they don’t want to) as expected in Janus v. AFSCME, the union and its affiliates will lose big. Based on earlier analysis, Dropout Nation determines that NEA could lose at least 25 percent of rank-and-filers, or 768,710 teachers and other school employees. That would equate to a $92.5 million decline in dues payments, which would cripple the union’s ability to finance its influence-buying.

This reality is one reason why NEA is already advising affiliates and locals to come up with new schemes to keep the dues flowing even if compulsory dues laws are struck down. This includes forcing rank-and-filers to sign membership renewal documents that will allow affiliates to automatically deduct from payrolls for years to come unless they opt out in writing; this is being done by the union’s Education Minnesota affiliate. Other affiliates may try to write similar agreements into collective bargaining agreements, a tactic tried by the Michigan affiliate that was struck down by state courts a few years ago.

Of course, none of these steps have anything to do with actually providing services that teachers need in order to do their jobs, something that NEA and its affiliates should be doing in the first place. The fact that teachers mostly contact their locals for help when necessary means that in many cases, the locals could simply cut out NEA national (along with the state affiliates) and operate on their own. The NEA affiliate in Clark County, Nevada, which has had woes related to its busted voluntary employee benefits association, may end up being one of the first of many locals that leave the NEA fold; the union’s former Memphis local did so earlier this year.

As for overall revenues: NEA generated $385 million in 2016-2017, a slight drop over revenue levels in same period last year. One reason for the decline: A 33 percent decline in dividends it collected from its investment portfolio (from $1.5 million in 2015-2016 to a $970,223 last fiscal year). Mike Antonucci goes into detail about NEA’s investments in Corporate America. But it suffices to say that it could do better on that front.

Another factor in NEA’s revenue decline: NEA Member Benefits, the financial scheme the union runs to peddle annuities to its rank-and-file and get kickbacks from Wall Street. NEA collected just $2.3 million from Member Benefits in 2016-2017, a 72 percent decline from the previous year. [As for NEA Member Benefits?It generated $97 million in 2016, a 1.4 percent decrease over revenue in the previous year, according to its tax filing with the Internal Revenue Service; while it continued to sell annuities at a brisk pace, the decline can be attributed to a 19.6 percent decline in investment income.]

The good news for NEA’s staffers is that the leaders took pay cuts. The union’s president, Lily Eskelsen Garcia, collected $348,732 in 2016-2017, a 47 percent decrease over compensation levels in the previous year. Garcia’s second-in-command, Becky Pringle, took home just $331,022, a 24 percent decline in pay. Princess Moss, who oversees NEA’s finances, was paid $310,841, a 29 percent decline over last year. Altogether, the union’s top three leaders took home $990,595, considerably less than the top three leaders at the rival AFT.

The union also had 384 staffers earning six-figure sums, a decrease from the 403 top-paid staffers on board in 2015-2016. Executive Director John Stocks collected $375,942, a 20 percent decline from 2015-2016, while Alice O’Brien, the union’s general counsel, picked up $257,266 in 2016-2017, slightly more than in the previous period. Michael McPherson, NEA’s Chief Financial Officer, was paid $285,360, a 1.3 percent decrease over 2015-2016, while Jim Testerman, who is in charge of organizing and increasing rank-and-file for the union, was paid $257,948, a slight decline over last year.

But not everyone took a hit to their wallets. Marcus Egan, NEA’s chief lobbyist, got a raise; he was paid $208,702 in 2016-2017, a 7.9 percent increase over the previous year. Rocio Inclan-Rodgriguez, the senior director in charge of the union’s efforts to portray itself as a social justice group (and co-opt progressive and old-school civil rights groups), also got a raise. She was compensated to the tune of $259,250 last fiscal year, an 11 percent increase over the previous period.

You can check out the data yourself by checking out the HTML and PDF versions of the NEA’s latest financial report, or by visiting the Department of Labor’s Web site. Also check out Dropout Nation‘s Teachers Union Money Report, for this and previous reports on NEA and AFT spending.

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The Dropout Nation Podcast: The High Cost of Teacher Pay


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On this week’s Dropout Nation Podcast, I discuss what will likely be the most-important driver for reforming how teachers are evaluated, compensated and given tenure: The high costs of traditional…

Dropout Nation Podcast Cover

On this week’s Dropout Nation Podcast, I discuss what will likely be the most-important driver for reforming how teachers are evaluated, compensated and given tenure: The high costs of traditional teacher compensation being borne by America’s taxpayers — including more than $367 billion in unfunded retirement healthcare liabilities for teachers and million-dollar lifetime retirement payouts — as seen in battles in Vermont, Pennsylvania and Indiana.

You can listen to the Podcast at RiShawn Biddle’s radio page or download directly to your iPod or MP3 player. Also, subscribe to get the podcasts every week. It is also available on iTunes, Blubrry, Podcast Alley and the Education Podcast Network.

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