NY Governor Cuomo: must slash skyrocketing pensions

NEW YORK (Reuters) – New York state must slash the rapidly rising pension burden of schools and local governments, Governor Andrew Cuomo said on Wednesday, unveiling plans for a sixth tier of benefit cuts.

The new tier, which the Democratic governor said would save $93 billion over the next 30 years, would only affect newly hired public workers. New York’s state constitution prevents lawmakers from curbing retirement benefits already granted.

“Reducing the skyrocketing pension burden faced by local governments and schools will also help get control of local property taxes that are driving New Yorkers from their homes and from the state,” Cuomo said in a statement.

To wring out the savings, the retirement age would be raised three years to age 65, early retirement would be abolished, employees would have to pay in 6 percent of their salary, and vesting would take 12 years instead of 10 years.

New York City Mayor Michael Bloomberg has clamored for another tier of less generous pension benefits for city workers. Cuomo’s estimate did not include the $30 billion of savings he said the city could reap if the bill were enacted.

Spokesmen for the Democrat-led Assembly and Republican-controlled Senate had no immediate comment.

Many states, counties, cities and towns are finding that the credit crisis, which shriveled investment returns, and the revenue-gouging recession have made it increasingly difficult to afford the retirement benefits they granted public workers.

In April, the unfunded liability states faced was estimated at $1.26 trillion by the Washington, D.C.-based Pew Center on the States. The high cost of these benefits risks crowding out other vital government from education to crime-prevention.

New York state’s $136 billion pension fund has fared unusually well, as it is about 100 percent funded. But the unfunded liability for New York City’s $113 billion pension funds is estimated at $76 billion to $122 billion.

Pension contributions from the state, schools and local government outside of New York City have risen to $6.6 billion a year from $368 million in 2001, Cuomo said. For New York City, the cost has climbed to $8.4 billion from $1.1 billion.

Cuomo’s bill, which Bloomberg said he supports, would also prevent public workers from increasing their pensions by compressing how much overtime can be used to set their benefits. Credits for unused sick days would be abolished; wages above the governor’s salary of $179,000 would not count.

While the first-year governor’s bill mirrors efforts by some of his peers in other states, he has stopped short of trying to limit collective bargaining rights, a strategy taken by governors in Wisconsin and New Jersey.

Still, New York’s public workers unions reacted harshly. Ken Brynien, president of the New York State Public Employees Federation, estimated the average pension is only $18,300 a year.

“This ink is barely dry on Tier 5, but now the governor is proposing draconian pension cuts that would inflict permanent damage on middle-class workers such as nurses, parole officers, bridge inspectors and cancer workers for a transient problem,” he said.