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Pension changes could be enduring effect of merit pay pilot

The full impact of the city’s short-lived experiment in teacher performance pay could still be felt.

The Department of Education confirmed today that it has ended a three-year-old school-wide bonus program that was called “transcendant” when it was introduced. The decision, spurred by a RAND Corporation report that was commissioned by the Department of Education’s private fundraising wing, follows a previous study that found no performance boost for participating schools. We reported in March that the city had quietly suspended the bonus program.

(Read the complete RAND report.)

The city will save money this year by not disbursing the bonuses, which it says cost $56 million over the life of the initiative. (The previous report, which the city did not commission, put the costs even higher, at $75 million.)

But the long-term effect could come from a pension sweetener introduced to get the teachers union on board with the controversial program. Then-UFT President Randi Weingarten hinged her support for the bonus program on a change in the law that would allow teachers to retire early, starting at 55 instead of 62, without taking a hit to their pensions.

The change put additional strain on a pension fund that already appears unable to support the pensions the city has promised. Although teachers now contribute more toward their pensions each year, the fund must still support teachers who retired before 2007 under the old rules. The new rule also increases the number of years that retirees are likely to draw pensions.

UPDATE: Some say the change could leave the city on the hook for millions of dollars. Larry Littlefield, a frequent critic of the union’s pension deals, wrote in the comments section today that the 2007 deal “will suck money out of the classroom at an increasing pace for decades.”

City officials said the 2007 change will actually earn the city money in the long run because teachers are contributing more toward their pensions each year and also contributing for their entire careers, instead of just a portion. A subsequent change to pension rules increased the annual contributions for new teachers entering the system.

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