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WHO WILL PAY?
STATE OFFICIALS URGE DISTRICT, TEACHERS, CITY TO WORK IT OUT

A lot of people, starting with Buffalo Teachers Federation President Philip Rumore, think the state will bail out the Buffalo School District when it has to ante up for the back pay owed teachers.

Everyone, that is, except the people expected to write the check.

"I do not see it in the cards," said Deputy Assembly Speaker Arthur O. Eve.

"I don't know who the deep pockets are, but it's not us," said State Sen. Dale Volker.

Eve and Volker, leaders of the local delegation to the State Legislature, said the state doesn't help fund court settlements that they're not a party to. And helping Buffalo out of its legal problems would set a bad precedent, they said.

"To my knowledge, there's never been a funding of a suit settlement," Eve said.

Doing so, he said, would send a "horrible" message to local governments and school districts across the state.

"That means people could go throughout this state and do things they shouldn't do and think the state will bail them out," he said.

"This is going to be a very difficult problem that the city and school district have to work out," Volker said. "We're not just going to come in and take care of it."

Rumore dismisses such talk.

"I would expect them to say that," he said. "No one from the state is going to say they're going to help because that would raise everyone's expectations."

Rumore continues to bank on state participation to settle the dispute.

"We make it affordable by trying to get it from the state, which has a tremendous surplus, and the federal government, for the federal program," he said. "I would hope there would be as little as possible coming out of local resources."

Others say Eve and Volker's comments are consistent with the state's history of dealing with lawsuits they're not a party to, and the political mood in Albany.

"The state's not interested in providing a financial solution to this problem," said Terry O'Neil, an attorney retained by the city to deal with the back-pay dispute.

"They've never been in better financial shape in Albany than this past year, and we saw no indication they would be willing to use any of it (to fund a settlement)," he said.

There's nothing even close to a consensus on what's owed -- the union says $192 million, the district a little less than $23 million -- much less who is going to pay for it.

Rumore talks of a state, and possible federal, rescue package. State officials say the city should bankroll the bailout. City officials say they don't have the legal authority, or the interest, to do so.
Lawyers for the School Board talk of bankruptcy.

This much seems clear: Only the district is liable for the back pay owed teachers because it is the one being sued by the union. The city and the state can't be required to pay damages in a lawsuit they weren't a party to.

That leaves the school district two options: It can come up with the back pay from its own resources -- primarily operating aid it receives from the city and state and federal governments -- or it could appeal for contributions from those outsiders.

While many in city government have assumed the state would kick in -- Albany provides three-quarters of the school district's operating aid -- Eve said the assumption in Albany is that the city would be the one to help out.

"I would assume the city is (the district's) source of dollars," Eve said. "I can't see how the city is not a partner."

The city doesn't have the legal authority to sell bonds -- the most likely method of payment -- to finance a settlement, said City Comptroller Joel Giambra. Doing so would require the approval of the state Legislature, which could occur if the city asked. But city officials have said they're not interested in getting that permission.

Giambra said any potential interest in helping out, and talking the state into doing likewise, would be contingent on the negotiation of a reasonble figure.

"At the high numbers, everybody is just going to run for cover," he said.

Rumore said the union is willing to negotiate a lower figure and spread out payments. But a year and a half of talks involving the union, city and school district failed to yield a compromise.

There's a widespread assumption that bonds would be sold to provide the back pay. Depending on the amount due, that could be repaid over five to 15 years.

Settling at the district's figure would cost $5.1 million a year over five years. The union's estimate would cost $18.4 million a year for 15 years.

City financing of the bonds would require major property tax increases. The district would be hard pressed to cover the $18.4 million out of its own funds. Major layoffs would be required. The $18.4 million amounts to some 360 teaching jobs, or close to 10 percent of the teaching staff.

O'Neil, the city's lawyer, said anything close to the BTF's figure amounts to bankruptcy unless the state were to step in.

"If you don't get money from the state, in my opinion, you're bankrupt. You can't lay off enough people to pay for that, and it would be unwise for the board to bond it," he said.

Karl Kristoff, the district's lawyer, said that bankruptcy would be a prime option in that case.

"If we got hit with a judgment of $192 million, it would seem to me that bankruptcy would have to be seriously considered," he said.

Such a move would require the approval of the Legislature. Rumore said it would be a tough sell in Albany, one that unions throughout the state would oppose.

Sam Hoyt, who, along with Eve, represents the city in the Assembly, said such a request would get a fair hearing.

"That hasn't been presented to me, but I wouldn't rule out any option," he said.

Rumore scoffed at the notion of bankruptcy.

"We're not stupid enough to make a demand that we know could be used to make a case for bankruptcy or a control board," he said.

Bankruptcy would not wipe out the district's obligations to provide the back pay, or give it grounds to negate union contracts, as some have suggested. But it would give the schools a chance to negotiate a lower payment, based on its inability to pay.

A control board, on the other hand, would not lighten the board's debt, just put responsibility for managing its money in the hands of an outsider.

There's ample evidence, beyond the words of state legislators, that the state could be a hard sell to help fund a settlement. State budget officials said they're not spending a dime in this year's budget to fund lawsuit settlements the state government isn't a party to. The state the last three years has contributed money to local governments in financial distress, including Buffalo, but the amount has been rather modest, and has never gone to a school district.

Fifty-six municipalities have gotten a total of $108 million over the past three years. All have been the result of "member items," when individual legislators, or groups of legislators, have successfully lobbied for the funds.

In the case of Buffalo schools, the members who would have to lead the charge are the ones saying they're not interested.

"There is no possibility, to the best of my knowledge, for state grants in this type of a situation," Eve said. "We will always provide money for the schools and the kids, but when you get into lawsuits and settlements, I have never heard of that being done in my 32 years in the Assembly."

Rumore maintains that an affordable sum can be fashioned, and with the state's help.

"We have no interest in bankrupting the city or the board, and we're committed to trying to work out a solution that everyone thinks is fair," he said.

Giambra said it's time for the BTF to "get real about a reasonable settlement," and he said many of Rumore's rank and file members feel the same way.

"I've talked to a number of teachers who say this is absolutely crazy, we're going to get a check and then a layoff slip."

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