SCS retirees see doom in benefit cuts

May 23--Daisy Cleaves worked 38 years in Memphis City Schools, starting with awkward teens in junior high school. When the state needed more teachers to work with vision-impaired children, she signed up, got the certification and spent two decades in her car, driving to meet students in their home schools.

"When I started, I had 17 schools," said Cleaves, 70. "Everything you needed, you had to take with you because there was no storage. Rain, shine, sleet or snow, you had to have it."

She's working from her home now, signing up retirees for the Memphis & Shelby County Retired Teachers Association. They see it as the best way to fight large-scale changes to their retiree benefits on the school board's agenda.

"When we were hired, we paid into the pension system and everything else based on the fact that we were told when you reach 30 years, you were going to get certain benefits," said Cleaves, president of the association. "Now, they are saying, we made a mistake, and we want to take that away."

In 2014, Tennessee passed a law requiring local governments with pension plans to fully fund the actuarial-determined contribution by 2017. A similar law for retiree health and life insurance is expected in five years.

Shelby County Schools has $1.4 billion in retiree benefit liabilities. As baby boomers pour into retirement, the board is being asked to cut the load.

"There's no easy way around it," Supt. Dorsey Hopson said last week. "That's why we are laying out options to gradually get to where we need to go."

Teachers get their pension through the state. In Memphis, their health and insurance are provided by the school board, which years ago chose to offer a richer plan than the state. Those benefits, called other post-employment benefits or OPEB, cost the school board about $30 million a year for retirees, including $18 million for those under 65. Teachers can retire at 60 or after 30 years of service.

Hopson is asking it to stop offering lifetime benefits for teachers hired after July 1 and end the benefits for teachers retiring after July 1, 2020. For teachers who have already retired, he'd recommending they receive $10 a month for every year of service to be used toward health premiums.

"I am blessed that I don't' have any health problems," Cleaves said. "But can you imagine someone my age with all their prescriptions going out looking for insurance? If the Affordable Heath Care Act goes away, then what?"

Dr. Charles Green, who retired last year after two decades in MCS, says the immediate losers will be people who came to education as a second career. Besides reduced pensions, they now will have to get insurance elsewhere, which he says will mean more people in Memphis struggling to get by.

But more than that, Green sees this as another of the changes in the last few years that have affected teachers' pocketbooks. That and the stress of the job is steadily shortening the long-term careers people used to have in education.

"Now you are looking more at who will stay three to five years and move on. Then you bring in another new person. I don't know if they think that is good for the community or if it is the financial commitment that drives it. But there is no real drive toward a career educator anymore," he said.

Stephanie Fitzgerald, former president of the Memphis Education Association, says the board should have been paying attention earlier. She asks why it didn't invest the $15 million it saved when it switched from BlueCross BlueShield to Cigna to pay down its OPEB liability.

"That should have been put in the OPEB fund," she said. "The new money from the state (for teacher health insurance) should also go to OPEB."

Before the recession started in late 2007, Elizabeth Kellar, president and CEO of the Center for State and Local Government Excellence in Washington, says many governments were starting to pre-fund the liability. "When the layoffs and hiring freezes started, a lot of those good intentions got put on the back burner." And while some groups are having success in banding together and fighting back in some states, "there's a lot more protection for pensions than health coverage."

The former MCS board contributed $12 million in 2012 toward its $1.1 billion OPEB liability, and had money in its fund balance that it could have used for more, says former school board member Dr. Jeff Warren."The county made us spend it," he said.

The Shelby County Commission wants the board to reduce the exposure to the risk of default. "It is not realistic to expect that current funding sources are going to be able to provide sufficient funds to pay the current actuarially determined liabilities," said Mike Swift, the county's CFO.

Legacy SCS transferred $342 million of OPEB liability to the merged district. The municipalities are responsible for the long-term benefits of the teachers who chose to work in them. Superintendents in the municipalities say they must reduce their exposure too.

The issues come to a head as SCS loses thousands of children to charter schools a year. That means it has less revenue coming in, and any money it tries to set aside takes proportionately more from classrooms.

Fitzgerald chafes whenever that math is used. "If the children don't have good teachers that want to teach in Shelby County, how is that good for students? Why would I work here when Germantown, Fayette County are wooing teachers?"

Teachers and board members both wonder how difficult it will be to recruit teachers to the profession if the benefits disappear.

"So, you are going to tell these people you went out to recruit to come to Memphis that you are not going to give them benefits? Would you come? This is the same problem the city had with police and firemen," Cleaves said. "When you start cutting benefits, people planning their careers make other decisions."

The school board has no definite timeline for deciding the issues, but it is expected to eliminate benefits for retiree spouses by Jan. 1, 2016. Since open enrollment for the Affordable Health Care Plan begins Oct. 1, those discussions will have to start this summer.

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