Submitted by Larry Littlefield, Oct 20, 2007 08:35

(pension buy-outs are a time-honored strategy to lower costs)

Early retirement does not lower costs. It vastly increases costs, forcing you to reduce the amount you pay to those working later. If early retirement lowered costs, companies with early retirement and defined benefit pension plans would have lower costs than those without.

The thousands of teachers walking out the door will be entitled to health insurance, but so will the new hires who replace them (if the city has the money to replace them). So the city will be providing health insurance for more people. And the difference between 62 and 55 is huge. That is 10 years compared with 3 years, during the time when health care costs escalate, that Medicare does not help pick up the tab.

The new teachers will earn less. But not less than the new teachers and pensions together. Indeed, I'll wager that the pensioners will be paid more to do nothing than the new hires are paid to work in the toughest schools.

So why can they claim a costs cut? But taking peak of the market asset values in the pension plan, adding a high rate of return to that, and saying the money to pay for all this is there. First of all, if it is there, the city should be able to cut its pension contributions below the level they have soared and use the savings to pay more to teachers on the job. But the money isn't there. And the cost can be deferred until Bloomberg is out of office.

A year or two of three from now, the drastic budget cuts in the schools, the new contract that pays new teachers 15% less (like DC37) or 40% less (like the cops and firefighers) will be described as un an expected result of uncontrollable mandatory decisions. Remember this day. The "merit pay" doesn't matter. When everyone understands that the schools will never be allowed to improve, the private providers will give up and take it away.

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