Green Room

Most of NEA’s Largest Affiliates Are Awash in Red Ink

posted at 4:31 pm on November 2, 2012 by

An Education Intelligence Agency analysis of 2010-11 Internal Revenue Service filings reveals as many as eight of the National Education Association’s 11 largest state affiliates do not have the financial assets to match their liabilities and total almost $400 million in combined debt.

The lion’s share of the union’s debt comes from employee pension and post-retirement health care liabilities. The costs of these benefits have troubled NEA affiliates for many years, causing budgets crises in places like Michigan, Illinois, Pennsylvania and Ohio. Even staff at NEA headquarters made concessions to help ease the strain of post-retirement benefits on the national union’s budget. The latest data show that many affiliates continue to struggle despite receiving substantial relief in pension liabilities.

EIA has constructed a table that lists each of NEA’s state affiliates, its budget deficit or surplus for 2010-11 and its net assets, positive or negative, as of the end of the 2010-11 school year. For purposes of comparison, the table also lists the number of days each affiliate could operate solely on reserves based on its 2010-11 expenditures and net assets.

These latter numbers are important because while certain state affiliates may have run budget deficits in 2010-11, they may still have more than enough reserves to cover one or more years of shortfalls. Others, however, continue to add to their mounting debt and will require some outside force to balance the books.

The New York State United Teachers ran a $29.9 million deficit in 2010-11, and is a total of $201.1 million short of assets to pay all liabilities. NYSUT is on the hook for $286 million in post-retirement benefits.

The California Teachers Association is much healthier, with a small $1.4 million surplus in 2010-11 and net assets of more than $115.6 million, good enough for 230 days of operation.

The New Jersey Education Association managed a $1 million surplus after gaining more than $29.3 million in pension relief. Still, NJEA has more than $38.7 million in red ink.

The Pennsylvania State Education Association greatly improved its budget picture, but has only $6 million in net assets, enough for only 37 days of operation.

The Florida Education Association is similarly situated, with a small surplus and only 53 days of operational reserves.

The Illinois Education Association is still climbing out of a deep hole, finally breaking into the black after $4.9 million in pension relief, but its net assets will allow for only two days of operation.

The Michigan Education Association is a financial basket case, carrying an $11 million deficit in 2010-11, and falling $113 million short in assets. Believe it or not, the picture could have been much worse, as MEA managed to generate $31.1 million in pension relief.

The Ohio Education Association is not much better off. Despite $27.4 million in decreased pension liabilities, OEA still had a $9.1 million deficit and is $14.4 million short in net assets.

The Massachusetts Teachers Association cut pension liabilities by $10.1 million, but is still $2.8 million short of its obligations.

The 2010-11 picture for the Wisconsin Education Association Council was still relatively good, despite a $2.6 million budget deficit. The union had 168 days of operational reserve. However, these figures were mostly compiled before the effects of Act 10 on WEAC’s existence. We can expect next year’s numbers to look very different.

I make note of the 11th largest affiliate simply because its internal money problems have very much occurred under the radar. The Washington Education Association was able to reduce its unfunded pension liabilities by $3.2 million and run a surplus, but it is still almost $18.6 million short of covering its liabilities.

At least six other NEA state affiliates were able to reduce their pension obligations. Some were able to rescue their bottom lines, others were not. You can see from the table that the efforts of Connecticut and Minnesota left them both with a very large surplus, but affiliates in Iowa, Texas, Virginia and West Virginia were only able to slightly lighten their red ink.

I need to add that the South Carolina Education Association has not filed, or has not yet had posted, its disclosure report for 2010-11. SCEA was placed under NEA trusteeship in April 2010 and its report would cover the first year of national oversight of its finances.

It is ironic that the internal situations of these affiliates are very much, in microcosm, like that faced by state governments. There are a number of ways out of the red ink: increased dues, increased membership, and better return on investments on the revenue side, and reduced staff, reduced benefits, and negotiated relief with employee unions on the expenditure side. And, like some state governments, unions could just ignore the problem and hope it goes away. Although NEA would rather we didn’t, we should pay close attention to the measures it uses to deal with its own runaway labor costs.

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Some of it’s due to fighting anti-union and anti-public education legislation in certain states. FEA (Florida Education Association) spent certainly millions fighting at least two ballot initiatives a few years back. The legislature tried to cloak voucher schemes as “religious freedom” and parental rights or some such. To me, an attempt to get taxpayers to fund private concerns including parochial schools.

The judge hearing the case sided with the union, because the wording wasn’t clear and the judge felt that the average voter wouldn’t understand the true intent of the amendment.

That was obviously the point.

But now those initiatives are back on the ballot, though (I assume) worded a little differently.

Then last year FEA (along with help from NEA and AFT) fought the 3% retirement kick-in by public employees to FRS (Florida Retirement System). The unions won the case, but of course it’s in appeals.

One of the problems appears to be that if “the state” has to pay that 3% per employee back, it’s actually the school districts, counties and municipalities that will be on the hook. The state subtracted that money from whatever funding they were to get otherwise from Tallahassee.

Not sure, but I suspect that’s one way that Rick Scott and other Florida GOPers were able to say that they “increased” funding to public education by $1 billion this year, when in fact they hadn’t.

Dr. ZhivBlago on November 2, 2012 at 5:11 PM

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