Pension Fight To Dominate New York State Budget Talks

8:07 PM, Feb 23, 2012   |    comments
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Albany Bureau Chief

ALBANY -- A battle over pension benefits for new government workers in New York is shaping up to be a key battle as lawmakers and Gov. Andrew Cuomo head into the final month of budget negotiations.

With the Legislature on mid-winter break until Wednesday, Cuomo ramped up his vow to enact a new pension tier that would provide less generous benefits to new employees. He said this week that he would insist pension reform be part of the state budget for the 2012-13 fiscal year, which starts April 1.

Cuomo said his effort to curb burgeoning pension costs for state and local governments pits him against special interests.

"You have special interests that give a lot of money to politicians in Albany," Cuomo said Thursday on 1300-AM (WGDJ) in Albany. "This is them saying to the politicians, 'We want you to do this for us.' I'm saying to them, 'I want you to do this for the taxpayers.'"

Unions and Comptroller Thomas DiNapoli, who oversees the state's $140 billion pension fund, have protested the changes. Cuomo said the issue could force a government shutdown if pension reform isn't agreed to by the time the budget is due.

Danny Donohue, president of the Civil Service Employees Association, accused the governor of trying to attack the middle class. He said the average pension for the 265,000-member union is about $19,000.

He said if Cuomo wants to stop pension abuse, it shouldn't come at the expense of those earning a small pension in retirement.

"Anybody making $100,000 from a pension is abusing the system," Donohue said in a telephone interview Thursday. "Anybody making between $13,000 and $19,000 is not."

Cuomo is proposing a new Tier VI pension level that would increase contributions from 3 percent of a new employee's salary to as much as 6 percent. The retirement age would increase from 62 to 65.

The Democratic governor would also exclude overtime and other lump-sum payments from an employee's final average salary -- cracking down on the pension padding that has been widely criticized. His plan is estimated to save governments outside of New York City $83 billion over 30 years.

Perhaps the most controversial component would be to create a 401k-type option for new employees.

DiNapoli has warned that the pension system shouldn't be moved to a 401k-type program. He said it would add costs to employees and add financial risk for retirees.

"I stand firmly behind my position that defined contribution plans are not adequate for retirement security for public or private workers," DiNapoli said in a statement last week.

Donohue said a 401k system could lead to deficits in the pension system. New employees would be contributing to their own 401k and not to the state, potentially leaving a hole for current retirees.

Cuomo said a 401k system would be optional for new employees and a small component of the pension savings.

Assemblywoman Barbara Lifton, D-Ithaca, is among Assembly Democrats who have raised objections to Cuomo's plan. They are concerned about the impact on workers.

"One of the main problems we are facing as a state and a country is that middle class is disappearing," she said.

Assemblyman Gary Pretlow, D-Yonkers, said the state has yet to realize the benefits of Tier V -- a pension plan adopted in 2009 that lessened benefits for new public employees. That plan was expected to save $35 billion over 30 years.

"We're still trying to see if Tier V is working right. I think we should tread slowly on this," Pretlow said.

Pension costs have become a growing problem for state and local governments, in large part because the declines on Wall Street have meant higher annual payments to cover retirees' costs.

On Wednesday, city and county officials formed the New York Leaders for Pension Reform, headed by New York City Mayor Michael Bloomberg, to support Cuomo's push.

They estimated that pension costs have increased from $1.7 billion in 2002 to $12.5 billion this year. The group is coming to Albany next week.

The members include Hornell Mayor Shawn Hogan; New Rochelle Mayor Noam Bramson; Rochester Mayor Thomas Richards and White Plains Mayor Thomas Roach.

County executives involved include Dutchess County Executive Marcus Molinaro; Erie County Executive Mark Poloncarz; Monroe County Executive Maggie Brooks; Rockland County Executive Scott Vanderhoef and Westchester County Executive Robert Astorino.

Brooks estimated that Monroe County's pension costs will grow from $19 million in 2010 to $50 million by 2013.

"We have to talk about pension reform," she said Thursday. "It is truly, in my opinion, the biggest threat to the viability of county governments and local governments."

Molinaro said the current system is unsustainable.

"Ongoing pension reform that provides both the protection for the employee and the long-term stability for the employer -- thus the taxpayer -- is important," he said. "And the current tax structure does not enable that."

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