The distant thunder of the public employee pension crisis ahead is not so distant now: Thanks to the hit that the state pension system took from the economy's nosedive in 2008, local governments will have to make much bigger contributions to the system next year. That demands both a short-term fix and a new focus on what's really wrong.
First, the State Legislature must pass legislation allowing local governments to spread out the huge payment increases over several years - in effect, borrowing from the pension fund and repaying it with interest. It's not a good solution, but it beats making governments take the hit all at once and forcing them to cut services or raise taxes sharply. State Comptroller Thomas DiNapoli proposed this legislation last year, and he's trying again now to persuade the legislature to pass it. That has to happen.
Long term, we may have no choice but to reconsider putting new public employees into a system that guarantees public sector pensions, because taxpayers bear all the risk of stock market dips, and governments face huge, risky down-the-road costs.
Instead, we should at least look at a system like the one most private-sector employees have: Governments would pay a percentage of salary into a 401(k), and employees would contribute. That way, governments could budget for pension costs in the present, not the murky future. It's already done for higher-education workers in New York. Why not examine the idea for other public employees? hN