nyc school funding white paper final

S a v e O u r S t a t e s

“ S O S ”

A Full Analysis of the All-In Funding Costs for District Public Schools and Charter Schools

The IBO February 2010 Fiscal Brief Revisited

By Harry J. Wilson &

Jonathan Trichter

A Save Our States (SOS) White Paper

2

Contents

Executive Summary 2

Introduction 3

Problem Statement 3

Previous Reports 3

The Solution 4

Implementation 4

Summary Findings 4

Methodology 8

Conclusion 10

About the Authors 10

Appendix 11

Executive Summary

One of the important ongoing debates in

education reform circles is how charter school

funding compares to funding for district public

schools. In New York City, the best

comparison to date was conducted in 2010, by

the New York City Independent Budget Office

(IBO). After some adjustments in

methodology, the IBO eventually settled on

these results:

Per pupil funding for district public

schools: $16,011.

Per pupil funding for charter schools in

their own facilities: $13,652.

Per pupil funding for charter schools

that share space in district public school

buildings: $16,660.1

In effect, the IBO concluded that New York

City’s co-located charter schools receive

slightly more ($649 more) on a per pupil basis

than district public schools, but that charters

housed in their own facilities receive less

($2,359 less).

However, the IBO’s calculations were

incomplete, primarily because they did not take

into account the full extent of long-term

liabilities associated with district public

schools, namely pension and post-retirement

healthcare obligations (a.k.a. “Other Post-

Employment Benefits,” or “OPEBs”). The full

costs of these liabilities can be quantified

accurately within a range and must be included

when making fair comparisons in order to

derive comparable, all-in estimates of public

support.

1 These “co-located” charters receive the same amount of

per pupil funding as district public schools but benefit

from existing resources at the schools where they share

space. For the purposes of their cost comparison, the

IBO allocated to co-located charter schools a pro-rata

share of expenses associated with those resources in the

amount of $3,008 per pupil.

3


“ S O S ”

Save Our States (SOS) performed the same

calculations as the IBO but also performed

others in order to include the present value of

pension and OPEB obligations. The topline

results are the following:

Taking into account the present value of

just pension obligations for district

public schools adds $5,181 to $5,642 in

per-pupil costs, whereas the IBO only

accounted for $2,132 of those costs. So

the total per pupil support for district

public schools would be between

$19,060 and $19,521.

Taking into account the present value of

OPEBs adds an additional $762 per

pupil for district public schools,2

resulting in total support per pupil of

$19,822 to $20,283.

These amounts are about 24-27% higher than

the $16,011 IBO public support estimate for

district public school students but reflect a

much more accurate and complete analysis of

total per-pupil funding.3 Accounting for all

costs, including the present value of future

ones, New York City charter schools receive

significantly less public support than district

public schools.

2 We calculated this OPEB cost by following the City’s

chosen methodology. We considered other

methodologies – which by and large would have yielded

higher cost estimates. However, the limited public

disclosure made it difficult to develop other analyses

without making a large number of potentially faulty

assumptions. As a result, we chose to focus on the City’s

chosen methodology and the resulting $762 per pupil

cost described herein. 3 For their part, the typical New York City charter school

offers its education staff defined contribution pension

plans. The costs of these plans are already incorporated

into charter school budgets. There are a handful of

charter schools that participate in the City’s defined

benefit pension system; however, they currently

represent a very small percentage (approximately 6%) of

the charter schools in New York City and thus are not

broken out separately in this analysis.

Introduction

The New York City Independent Budget Office

(IBO) last compared the City’s financial

support for district public schools with its

support for charter schools in February 2010.4

While the IBO’s report included some pension

expenses associated with district public

schools’ workforce, the full costs of these and

other long-term obligations are significantly

more than the City’s own financial disclosures

reveal. This paper corrects for flawed

governmental accounting practices and reflects

the true costs of servicing New York City’s

long-term benefit obligations as a current

expense, adjusting the IBO’s data on district

public school support appropriately.

Problem Statement

Government accounting standards allow for

misleading and inappropriate mechanisms to

assess the cost of future obligations. Recent

changes notwithstanding, municipalities are

able to hide the full magnitude of these

obligations. In the case of public pensions, the

effect is an annual underfunding of guaranteed

future benefit payments to employees.

New York City’s topline financial disclosures

do not show these future payments as current

liabilities. Nevertheless, they can be calculated

on a present value basis and should be included

when determining the total annual amount of

public support for district public school

teachers and education staff.

Previous Reports

New York City’s Complete Annual Financial

Reports (CAFRs) show the City’s yearly

pension payments, which are calculated as if

the retirement system were funded at reported

levels. In reality, the retirement system is

funded at lower levels than its topline reported

4 “Comparing the Level of Public Support: Charter

Schools versus Traditional Public Schools.” A New York

City Independent Budget Office Fiscal Brief. February

2010

4

ratio. Therefore, the City’s real pension

expenses are, in fact, more than its annual

payments, since it will have to contribute more

at some point to compensate for the full deficit

and it is merely deferring a portion of today’s

cost into the future. While the CAFRs’

additional disclosures show the magnitude of

City pension underfunding, they do not reveal

the full annual costs of the unfunded

obligation, and previous IBO reports failed to

consider or include them in the amount of

support district public schools receive.

The Solution

To provide a more accurate funding

comparison of New York City’s district public

schools and its charter schools, SOS:

1) Determined the amount of underfunding

in the City’s applicable pension funds

based on sound economic and corporate

accounting principles;

2) Annualized the costs of these unfunded

pension and OPEB obligations; and

3) Added them to the overall amount of

funding received by public schools, as

determined by the IBO.

Implementation

It is SOS’s hope that policymakers will

consider the true costs of our governments’

long-term obligations when making budget

decisions in order to put scarce public dollars to

use most effectively and avoid the fate of

America’s troubled municipalities that failed to

do so. To be clear, this analysis does not argue

in favor of either charter schools or district

public schools; rather, we demonstrated that

prior analytical efforts have done an inadequate

job of quantifying the amount of funding

dedicated to various public school alternatives.

By rectifying these mistakes, we can provide a

far more accurate picture of public education

financing.

Summary Findings

Overall

To ensure equal comparisons, the IBO ignored

special education, pre-Kindergarten and other

programmatic student populations whose

education funding is asymmetrically distributed

across the system, as well as categorical aid

from the state and federal governments.5 The

results compared New York City’s per pupil

funding for general education students in a

district public school to general education

students in a charter school.

The undertaking presented a number of

challenges. For instance, the IBO points out:

“Constructing measures that allow an apples-

to-apples comparison of support for charters

and the other public schools is challenging due

to the complexities of the aid formulas in state

law as well as the education department’s

opaque accounting, which makes it hard to

associate spending with discrete programs.”6

In addition, the vast majority of charter schools

in New York City are located in public school

buildings, sharing space and facilities with a

district public school. These co-located charters

receive the same amount of per student funding

as do public schools,7 yet they often benefit

from the synergies of existing on-premise

resources, such as the janitorial, cafeteria,

security and healthcare staff (e.g., a school

nurse) or services already on site. Also, co-

located charters do not generally contribute

towards capital expenses to build and maintain

the school facilities where they operate. For its

part, the City relies on debt capital financing to

build and maintain its school facilities, so co-

5 “Comparing the Level of Public Support: Charter

Schools versus Traditional Public Schools”. A New York

City Independent Budget Office Fiscal Brief. February

2010. (p.2) 6 Ibid.

7 Funding is determined according to a per pupil

allocation formula and is the same for NYC public and

charter schools.

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“ S O S ”

located charters receive the benefit of the

City’s debt service on bonds issued for

educational infrastructure.

In its report, the IBO estimated the financial

benefits to co-located charters from these in-

kind benefits, including debt service

attributable to the DOE’s buildings and

maintenance. While the DOE claimed the IBO

overestimated the value of these benefits, this

paper does not address that controversy. Below

is an IBO table taken directly from their most

updated report showing their estimate for the

funding of charter schools: $16,660 per student

for co-located charters and $13,652 per student

for charters in standalone facilities.

Pension Costs

The next challenge for the IBO was how to

deal with pension costs. This presented two

issues:

1) The typical charter school offers its

teachers and staff a 401K retirement

plan and covers its employer

contributions out of its per pupil

funding allocation (or the DOE’s

adjusted operating expense - “AOE”).8

For public schools, though, pension

costs are not reflected in the DOE’s

budget, nor do they come from their per

pupil funding (or AOE). Instead, these

expenses are found in the City’s general

budget. So the IBO added a pension

8 Charter school employer 401K contributions come

directly out of their per pupil funding.

cost for general education in public

schools and calculated it to be

approximately $1.9 billion, or about

$2,132 per general education student.

2) The City is bound by its collective

bargaining agreement with the United

Federation of Teachers to offer a

defined benefit pension plan to its

public school workforce; this affords

workers a guaranteed level of benefits

upon retirement. To fund those benefits,

the City makes annual contributions

into two pension funds: the Teachers’

Retirement System (TRS) and the

Board of Education Retirement System

(BERS). Those funds do not have

enough assets to meet the City’s

ultimate retirement obligations to public

education workers. The City must

therefore make up the difference

through its own annual contributions.

But based on our assumptions and

accounting practices in keeping with

sound economic theory and those

governing private pensions, the City

regularly shortchanges those

contributions by billions.

For the year that was the subject of the IBO

report, FY2010, the City contributed around

$2.6 billion to TRS and BERS. The portion of

that contribution attributable only to the

teachers and staff who support general

education students is less: about 21% less,

according to the IBO, after subtracting the

pension costs for special education and other

categorical or programmatic staff not affiliated

with general education. But the flaw in the IBO

analysis is that it does not account for the full

magnitude of unfunded pension obligations,

which the City will have to pay at some point.9

9 The kinds of 401K pension plans that charter schools

offer have no similar additional obligations.

IBO Report Table - Measuring Public Support Per Student at Charter Schools 2008-2009 School Year

($ in 000s)

In DOE School

Building

Not in DOE

School Building

Adjusted Operating Expense 12,443 12,443

Software 10 10

Library Materials 6 6

Textbooks 58 58

Special Education Evaluation 62 62

Health 28 28

Transportation 339 339

Classroom supplies, furniture/fixtures 266 266

Food 407 407

Other Administrative Services 33 33

Facilities 878

Utilities (Heat, Light, Power, Fuel) 279

Safety 290

Debt Service 1,561

TOTAL Charter School Support 16,660 13,652

Public School Per Pupil General Education Spending 16,011

Difference in Per Pupil Support 649 (2,359) Sources: IBO; Department of Education

6

The following table is from the most recent

IBO report and shows the per pupil funding for

district public schools along with some key

line-items used in their methodology.

The IBO calculated the FY2010 per pupil

funding for district public schools to be

$16,011 – an amount that does not include the

cost of fully funding pensions earned and owed

to applicable general education support staff

and teachers. To calculate this cost

appropriately, one needs to settle on the

appropriate discount rate – through the use of

the appropriate yield curve – by which to

calculate the present value of these future

liabilities.

There is a broad debate about the appropriate

yield curve to use when discounting public

pension liabilities. The primary considerations

center around the underlying credit risk of the

pension plan sponsor; the underlying liquidity

of any comparable instrument; and the tax

benefits of any comparable instrument.

Working through these considerations, the

defensible boundaries of the debate include the

following potential approaches, in order of

increasing conservatism:

1) The AA-corporate bond yield curve:

This is the standard mandated for all

private pension plans and, in our view,

the least conservative approach that

remains intellectually defensible. The

underlying economic rationale is to

discount pension liabilities in a manner

consistent with the underlying credit

risk of a corporate plan sponsor;

2) The Build America Bonds (BABs) yield

curve: BABs represent the same

municipal credit risk and are taxable,

thereby avoiding the skewing impact of

the tax benefits of traditional municipal

bonds;

3) The AAA-municipal bond yield curve:

This also represents the same municipal

credit risk but trades in part on the basis

of the underlying securities’ inherent

tax benefits; and

4) The US Treasury yield curve: This is

the universally accepted approximation

of a “risk-free” rate and thus, in the

view of some economists, the best

proxy for public pension benefits that

are guaranteed.

All four of these approaches have adherents.

While we considered settling on just one

method, we thought that, for these purposes, it

would be best to avoid a debate, present the

impact of the first three methodologies and

establish a range of potential outcomes. (We

chose not to highlight results using the US

Treasury yield curve, because this approach

generated a significant outlier – to the high side

– differing from the others.)

Utilizing three of the above methods, we

calculate that the total annual costs are between

about $4.5 and $4.9 billion, or an added

expense in FY2010 of between $2.6 and $3.0

billion over what the IBO accounted for.

The table below reflects these costs on a per

pupil basis, as compared to the IBO’s estimate:

IBO Table - District Public School Per Pupil General Education Spending (2009-2010 School Year)

($ in 000s)

Spending

Total DOE 18,501,502

Tex Levy Funded Pre-kindergarten (29,625)

Categorical Programs (2,315,467)

Special Education Spending (3,062,134)

All Non-public School Payments (1,902,020)

Fringe Benefits for Categorical Programs (13,955)

Fringe Benefits for Special Education Programs (477,667)

Subtotal DOE General Education Spending 10,700,634

Debt Service for DOE 1,589,986

Pensions for DOE Staff 1,912,202

Total Support for DOE General Education Spending 14,202,822

Enrollment

Total Students 1,098,977

Pre-kindergarten (General Education) (22,673)

Charter Enrollment (30,519)

Nonpublic School Enrollment (sum=contract schools+pre-k at CBOs+Special Ed Pre-K) (71,480)

Subtotal: Traditional Public School Enrollment 974,305

Special Ed Enrollment (105,627)

Total Traditional Public School General Education Enrollment 868,678

Per Pupil General Education Spending

Dept. of Education General Education Spending 12,318

Per Pupil Debt Service for Education From City Budget 1,561

Per Pupil Pension Costs for Education From City Budget 2,132

Total Per Pupil General Education Spending 16,011

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“ S O S ”

In short, on a per pupil basis, this comes to

between $5,181 and $5,642, or $3,049 to

$3,510 more than the IBO’s estimated $2,132.

OPEB Costs

The final piece of the puzzle is OPEBs,

additional long-term obligations the City owes

to its district public school workforce, which

largely entail promised post-retirement

healthcare coverage. Unlike pensions, the City

effectively funds such benefits on a “pay-go”

basis and does not make sufficient annual

contributions for its future obligations, only its

obligations that year.

Government accounting rules require the

disclosure of annual OPEB outlays and

funding. For many municipalities, including

New York, it is not a pretty picture. The City’s

actuarially accrued OPEB obligations in

FY2010 were $76.6 billion, but the City only

contributed $1.6 billion in FY2010 towards that

obligation. The City’s net unfunded OPEB

obligation was therefore $75 billion.10

The

DOE’s proportionate share of that obligation

was $24.3 billion.11

The City applies a 4% discount rate to its

OPEB liabilities. That rate is a function of the

GASB standard (GASB 45) and like GASB 27

– the standard for public pension accounting –

10

“Annual Financial Statements, Department of

Education of the City of New York” For the Fiscal Year

Ended June 30, 2010. (p.46) 11

The New York City Department of Education’s

Annual Financial Statement (p.46)

was supposed to reflect the expected

investment income on assets set aside to

prefund these benefits. A fully funded OPEB

plan, or even one that is partially funded but

with a policy to fully fund in the future, could

adopt a high discount rate, much like public

pension funds, whereas an unfunded plan was

supposed to have a discount rate based on the

government’s general fund investments. In

other words, if a government doesn’t establish

a trust with prefunded benefits, GASB 45

stipulates that the discount rate be based on the

returns of the government’s liquid assets. These

are typically short-term money market rates

that, at the time GASB 45 was phased in,

earned around 4%. Today, those rates are much

lower, and a strong argument could be made

that New York City should lower its rate for

discounting its OPEBs so that it matches the

yield it currently earns on its short-term

investments. This would increase the City’s

stated OPEB liabilities. On the other hand, one

could make the argument that because OPEB

benefits are not constitutionally guaranteed by

New York State as pension benefits are, the

applicable discount rate could be higher to

reflect a softer contractual obligation. For the

purposes of this technical paper, we are not

taking a position on the appropriate rate for

discounting unfunded OPEB liabilities but

simply applied the City’s chosen 4% rate.

Although the City recognizes its chosen

discount rate for OPEBs, it does not amortize

its unfunded OPEB liability over time, but

rather recognizes it all in the first year.12

The

reason the City does this is likely because it has

no intention of paying down the obligation in

the immediate future and simply does not want

to bother with the extra accounting task. So we

did it ourselves, treating the unfunded OPEB

liability according to GASB 45 allowances and

12

“The New York City Other Postemployment Benefits

Plan Financial Statements,” as of and for the Years

Ended June 30, 2011 and 2010: Required Supplementary

Information, and Independent Auditors’ Report

Discount Rate Yield Curve (as of September 2, 2013)

*Pension Costs

Per Pupil

** New York City's Straight-lined 8%: $ 2,132

Build America Bonds Yield Curve: $ 5,181

AA Corporate Bond Yield Curve: $ 5,522

AAA Municipal Bond Yield: $ 5,642

Notes:

*General Education students only

**As reported by the IBO

8

amortizing it over 30 years as a level

percentage of projected payroll, applying a 4%

discount rate,13

and then stripping out the 21%

attributable to the non-general education public

workforce. This leaves us with around $760

million in FY2010 amortized unfunded OPEB

expenses, or an additional $762 per pupil.

Adding that OPEB expense on top of the

additional pension expense pushes per pupil

public support for New York City public

schools to between $19,822 and $20,283.

In sum, an accurate analysis of the district

public schools’ long-term obligations shows

that per pupil public support for district public

schools is materially higher than that for

charter schools.

Methodology

Pension Obligations:

By any metric, New York City’s pension plans

are underfunded. By one measure, the City

reported that TRS and BERS (the two pension

plans for public education workers) were only

63%14

and 71%15

funded in FY2010 with

unfunded pension liabilities of $18.3 billion

13

OPEB: A Plain-Language Summary of GASB

Statements No. 43 and No. 45 (p.4) 14

The Teachers’ Retirement System FY2011 CAFR

(p.1.2) 15

The Board of Education Retirement System FY 2011

CAFR (p. 92)

and $851 million, respectively. This particular

measure uses “actuarial asset values” and

“entry-age accrued liabilities.” Both

approaches are problematic.

1) Asset values are “actuarially”

smoothed over a five-year horizon.

So if the fund owns a stock

currently trading at $25.00 per

share, the value reported by the fund

could be $20, $30 or some other

number that reflects a five-year

smoothing. This is an accounting

gimmick that obscures the true

funding status of a pension fund.

2) On the liabilities side of the ledger,

government accounting encourages

a high discount rate by linking it to

a pension plan’s assumed

investment return.16

This is both

methodologically flawed – a

deviation from the standards to

which all private pension funds are

held – and creates a perverse

incentive for public pensions to

overstate expected returns, while

also assuming more risk to justify

such expectations. The resulting

inflated discount rates reduce – on

paper – the present value of future

liabilities. It is another accounting

gimmick that understates pension

shortfalls and has no grounding in

economics or finance. Any

corporation or private pension that

utilized the same approach likely

would be the target of both litigation

and regulatory action.

Fortunately, the chief actuary for New York

City reports the market value of pension plan

assets. For TRS, the market value of assets in

FY2010 was $26.4 billion, whereas the

actuarial asset value was an artificially inflated

16

GASB Statement 25

SOS Table - General Education Cost Comparison

($ in 000s)

Cost Per Pupil Cost Per Pupil

Traditional NYC Public Schools (IBO Calculation): 16,011$ 16,011$

*Low Range **High Range

Additional Unfunded Pension Obligations & Adjusted 3,510$ 3,049$

Subtotal 19,521$ 19,060$

OPEB Obligations 762$ 762$ Total Public School Costs (Adjusting for Pension & OPEB Obligations) 19,822$ 20,283$

NYC Charter Schools: Co-located

Cost Per Pupil 16,660$

Cost Per Pupil Non Co-located

13,652$

Charter School Savings (Per Pupil): *Low Range **High Range

Co-located Charter Schools 3,162$ 3,623$

Non Co-located Charter Schools 6,170$ 6,631$ Notes:

* Pension liabilities discounted using a AA-Corporate Yield Curve

* Pension liabilities discounted using a AAA-Municipal Yield Curve

9


“ S O S ”

$31.1 billion (a difference of about $4.7

billion). For BERS, the market value of plan

assets in FY2010 was about $1.8 billion,

whereas the actuarial asset value was close to

$2.1 billion (a difference of about $300

million).

The City’s chief actuary also discounts plan

liabilities using the conservative interest rate

based on the yields of US Treasury securities

equal in duration to the horizon of plan

liabilities. This alternative method is called the

“market value accumulated benefit obligation”

(MVABO).17

In FY2010, the MVABO for TRS

was $65.8 billion, which is about $39 billion

more than the $26.4 billion in market value

assets the plan has available to cover the

liability. For BERS, the MVABO was about $4

billion, or about $2.2 billion more than the

plan’s $1.8 billion in market value assets.

SOS discussed this discounting method, but did

not include it in our main findings. Instead,

SOS selected three interest rates: AAA-

municipal bonds; BABs; and AA-corporate

bonds to determine a range of reasonable

outcomes. All of these are more reasonable

than New York City’s previous 8% discount

rate and even its recently reduced 7% rate.

However, we did conduct the relevant

calculations using US Treasury rates and can

show the results here in the methodology

section; the next table shows the per pupil

pension cost for New York City’s district

schools to be $6,612,18

almost a thousand

dollars more per student than using the next

most conservative rate:

17

The Board of Education Retirement System FY 2011

CAFR (p. 90) 18

Rates are as of 9/18/13

Instead of applying a single straight-line

discount rate to liabilities in each out-year, SOS

matched its chosen yield curves year-to-year

with like durations of our actuarial estimates

for New York City’s future pension payments.

Then, we adjusted the annual cost of benefits in

FY2010 by discounting the new unfunded

liability at the implied discount rate for AAA-

municipal bonds, BABs and AA-corporates (as

well as US Treasuries, for illustrative

purposes). According to New York City’s

actuarial practices, unfunded accrued liabilities

are amortized over 22 years in payments that

increase by 3% each year. 19

So we amortized

the newly uncovered pension liabilities

accordingly and added only the amount due in

FY2010 to public school pension costs, while

simultaneously adjusting the normal costs for

each new discount rate. These last steps are the

application of the newly calculated annual

required pension contribution (ARC) for 2010.

Finally, we stripped out 21% of the new ARC

in order to exclude non-general education staff.

OPEBs

As discussed, New York City recognizes its

entire unfunded OPEB liability in the current

year.20

So we amortized the liability and used

the City’s chosen 4% discount rate for OPEBs,

amortizing it over 30 years as a level

19

The City of New York FY2012 CAFR (p. 111) 20

“The New York City Other Postemployment Benefits

Plan Financial Statements,” as of and for the Years

Ended June 30, 2011 and 2010: Required Supplementary

Information, and Independent Auditors’ Report

SOS Table - With U.S. Treasury Yield

Discount Rate Yield Curve (as of September 2, 2013)

*Pension Costs

Per Pupil

** New York City's Straight-lined 8%: $ 2,132

Build America Bonds Yield Curve: $ 5,181

AA Corporate Bond Yield Curve: $ 5,522

AAA Municipal Bond Yield: $ 5,642

US Treasury Yield Curve: 6,612

Notes:

*General Education students only

**As reported by the IBO

10

percentage of projected payroll.21

After we

stripped out the 21% attributable to the non-

general education public workforce, we divided

the remaining figure (about $760 million) by

the number of students (996,978) to arrive at

$762 per pupil. 22

Of course, we believe that the City’s chosen

discount rate for its OPEB liabilities is based

on an outdated interpretation of a GASB

guideline (Statement 45). It is therefore

worthwhile to consider other, perhaps more

appropriate rates.

One could argue that, at the low end, a more

appropriate yield for discounting OPEB

liabilities would be a 15-year Treasury yield.

Treasuries are a prudent, “risk-free” investment

vehicle for municipalities’ short-term

investments with enough liquidity to fund such

obligations as they come due. Discounting the

City’s OPEB liabilities using a 15-year

Treasury yield would value the annualized

OPEB cost (both the adjusted normal cost and

the amortized UAL) on a per pupil basis at

$920, as opposed to $762 using the City’s

chosen rate.

At the high end, one could argue that it is

appropriate to use a AA-corporate bond yield

for discounting OPEB liabilities. Since the

obligations are not constitutionally guaranteed,

perhaps it is permissible to assume some

embedded risk surrounding future payment

streams. Discounting the City’s OPEB

liabilities using a AA-corporate yield at the

same duration would value the annualized

OPEB cost on a per pupil basis at $779,23

a

difference of only a few dollars more than the

$762 arrived at via the City’s chosen rate.

21

OPEB: A Plain-Language Summary of GASB

Statements No. 43 and No. 45 (p.4) 22

Again, typical City charter schools provide no

comparable post-retirement health care benefits. 23

Rates are as of 9/19/13

Conclusion

When comparing the amount of public funds

dedicated to New York City public schools and

charter schools, it is only fair to include the real

value of today’s costs for the promised benefits

of tomorrow. The IBO report fails to do this for

unfunded post-retiree health care costs and only

captures a portion of these costs for employee

pensions, thus creating an incomplete portrait

of total per-pupil funding for district public

schools.

The fair value of these promised benefits can

be calculated thanks to additional disclosures in

New York City’s CAFRs. SOS accounted for

these unfunded promises and included them in

the present value costs of New York City

public schools, which receive in the range of

$19,822 to $20,283 in public funding per pupil,

as compared to $13,652 to $16,660 for New

York City charters.

About the Authors

Harry J. Wilson is the Founder and Chairman

of Save Our States, as well as the Founder and

CEO of MAEVA Group, LLC, a boutique

corporate and municipal transformation firm

based in White Plains, New York. Mr. Wilson

is a nationally-recognized expert in corporate

restructurings and turnarounds, in public and

private pensions and public spending. Harry

spent his early career as an investor at some of

the nation’s top financial firms, including The

Blackstone Group and Silver Point Capital. In

2009, Harry served as a Senior Advisor at the

US Treasury Department on the Auto Task

Force where he was the lead point person on

the General Motors turnaround, the largest in

American history. In 2010 he was the

Republican nominee for New York State

Comptroller, when he won 53 out of 62

counties and narrowly lost to the incumbent.

Save Our States is focused on analyzing public

policies that can help stimulate economic

11


“ S O S ”

growth or promote the more effective use of

public resources. In addition to these

responsibilities, Mr. Wilson serves: as a

Presidential appointee to the Advisory

Committee of the Pension Benefit Guarantee

Corporation, the federal agency which oversees

the private pensions of 44 million Americans;

on the board of two nonprofits, Youth, INC and

The Hellenic Initiative; and on the board of

directors of Visteon and YRC Worldwide.

Harry has an A.B. in government, with honors,

from Harvard College and an MBA from

Harvard Business School. He and his wife of

16 years, Eva Romas Wilson, have four

daughters and reside in Westchester County,

NY.

Jonathan Trichter is the acting executive

director of Save Our States and a principal at

MAEVA Municipal Solutions, a subsidiary of

The MAEVA Group that concentrates on

municipal restructuring and renewal. Mr.

Trichter has had a long career in public policy

and municipal finance, including working in

New York City government, founding a public

policy institute at Pace University, serving as

an adjunct faculty at Fordham University in the

political science department and working as an

investment banker in JP Morgan's public

finance department. He is a graduate of Emory

University and resides in New York City with

his wife, Joey Bartolomeo.

Appendix

The following tables are similar to those in

IBO’s report, but with adjustments for

unfunded pension liabilities (discounted via

more reasonable rates than what the City uses)

and OPEB liabilities. The highlighted figures

are those that differ from the IBO’s.

Applied Discount Rate: Build America Bond Yield Curve

($ in 000s)

Spending












Enrollment




Nonpublic School Enrollment (sum=contract schools+pre-k at CBOs+Special Ed Pre-K)(71,480)








OPEBs (per pupil) 762


Applied Discount Rate: AA-Corporate Bond Yield Curve

($ in 000s)

Spending












Enrollment














Applied Discount Rate: AAA-Municipal Bond Yield Curve

($ in 000s)

Spending












Enrollment














12

Applied Discount Rate: Treasury Bond Yield Curve

($ in 000s)

Spending












Enrollment














nyc school funding white paper final

Documents

district public schools

pupil funding

pupil support

pupil costs

t e s s o s

ibo public support estimate

new york city charter

charter school funding