ALBANY — State legislators are proposing that school districts be allowed to set up special reserve funds for potential increases in teacher pension costs they say will inevitably occur in future years.

"This is something that helps school districts do their long-term planning," Westchester Democratic Assemblyman David Buchwald said of the proposed bill that went through the Assembly Education Committee on Wednesday.

Districts now set aside about 9.8 percent of their teacher payrolls for pension costs, with the rest coming from the state Teachers Retirement System, said Michael Borges, executive director of the state Association of School Business Officials.

That is projected to rise to 10.6 percent for the coming 2018-19 school year and would be reflected in the tax bills going out next fall.

The Teachers Retirement Fund will formally adopt the rate in August. Like the Business Officials, they support the idea of a reserve as well.

The local rates risen and fallen through the years – depending on the investment returns that the Teachers Retirement System has received.

Because teachers and other public employees' pensions are guaranteed by the state Constitution, localities make up the difference from their budgets when the returns decline, often with a stock market drop or a recession.

Following the financial crash of 2008, for instance, the Teachers Retirement fund reduced what it could pay, meaning localities had to make up the difference. At the same time, the state cut aid due to the recession. As a result, school districts laid off staff in order to balance their books.

"We had to lay off teachers just to pay retirement benefits," Borges said, adding that reserve fund could serve as a cushion in those situations.

School districts are already allowed to have reserve funds for non-teaching support staff such as bus drivers or maintenance workers. The proposed legislation would set up a sub-category for teachers.

Actually, school districts can maintain up to 11 reserve funds for a number of costs such as unemployment or workers compensation insurance and capital projects.

Reserve funds have been criticized, though. Some say the funds, if they are too large, would be better used for tax relief, especially in districts with high property taxes.

But Borges believes it's better to have a reserve for the inevitable downturns in what the Teachers Retirement system puts in each year. "You can plan for these things or be taken by surprise," he said.

The legislation would allow districts to put in up to 2 percent of the prior's year payroll, with up to a maximum of 10 percent in reserve.

Brooklyn Republican Senator Martin Golden is sponsoring the measure in the Senate.

rkarlin@timesunion.com 518 454 5758 @RickKarlinTU