The battle over reining in public pension costs in New York, city and state, heated up this week when a group of chief executives led by Mayor Bloomberg went to Albany to reinforce the message every Empire State resident must understand: the skyrocketing cost of public pensions is pushing the state and local governments toward bankruptcy.
“We really are up against it,” Bloomberg said. “We are going to have fewer services, we are going to have fewer employees, and in some cases we are going to have higher taxes if this continues.”
The mayor’s right, and Gov. Cuomo knows it. That’s why he’s trying to get a Tier 6 pension reform measure enacted. Contrary to what you hear from the public employee unions, a Tier 6 would not affect current workers at all. It would only apply to future hires. That’s what a new tier is — a new, lower level of benefits for prospective workers. Reducing pensions for existing employees would be illegal under the state constitution.
Under Tier 6, the retirement age for most state workers would be increased from 62 to 65 to qualify for a full pension. Police and firefighters would be exempt from the increase. Payments would decrease from the 60 percent of salary that’s in effect today to about 50 percent. And workers would no longer be able to pad their pensions by working extra overtime in their last few years on the job, as so many do now.
What would all this achieve? About $30 billion in savings over 30 years for city taxpayers, and another $83 billion statewide. These savings are necessary to keep providing the services New Yorkers rely on, as Bloomberg pointed out. Despite what you hear from the public employee unions, and their allies like state Comptroller Tom DiNapoli, the cost of public pensions continues to skyrocket — in large part because they are defined-benefit plans. That means that when the pension fund’s investments don’t yield high enough returns, taxpayers make up the difference. Contrast that with most private sector retirement packages, which are defined-contribution plans, meaning benefits vary with the performance of an investment like a 401(k).
DiNapoli has pointed out that a Tier 6 would not provide any immediate relief to the city or state budgets. That’s true, but it’s beside the point. The point is long-term fiscal stability. Pension reform will provide that in a meaningful way. Otherwise bankruptcy is far more likely — think of Albany as the next Athens.
Cuomo is a reformer, and, on this issue, so is Bloomberg. We urge our readers to tell their lawmakers to support pension reform, and help bail the city and state out of their financial dilemmas before, as in Greece, it’s simply too late.