Pension reform will save New York taxpayers billions in the future
It won't help much today. Its adoption was ugly. And it isn't all that was hoped.
Yet fundamental pension reform for public employees has finally passed in Albany. Taxpayers can breathe easier knowing that a potentially crushing burden will be gradually eased.
Despite the enormous power of New York's public employee unions, Gov. Andrew M. Cuomo managed to wrestle reforms through the legislature that will cut pension benefits for future state and local employees by billions of dollars. The age for new hires to collect will jump a year, to 63. Workers will have to contribute as much as 6 percent of their pay into the plan, versus just 3 percent now. The proportion of final salary used to calculate payouts will be cut. And nonunion members earning $75,000 or more will gain a 401(k)-style option.
To get all this, Cuomo and the State Legislature engaged in the worst kind of backroom dealmaking, wrapping several big issues into a giant, hairy tarball studded with mysterious constitutional amendments and a tawdry compromise on redistricting in which many lawmakers and the governor betrayed their no-gerrymander promises. To call this sausage-making would be an insult to the state's butchers.
But this is Albany, never a paragon of transparency, so let's be glad that at least pension reform came out of all the ugliness. Although New York's $140-billion pension fund is in far better shape than most, growing pension obligations are gobbling up tax dollars and crowding out public services. New York taxpayers will have to kick in $12.2 billion this fiscal year, up from just $1.4 billion a decade ago. Part of the problem was the 2008 meltdown on Wall Street that hammered the state's pension fund. But politicians have jacked up benefits over the years, and the number of eligible workers has grown.
The state constitution bars benefit reductions for existing workers. But at least the newly adopted reforms will cut costs. The governor predicts savings of $80 billion over 30 years -- assuming future lawmakers, always eager to please the unions, don't undo the gains bit by bit in the years ahead. The reforms try to prevent this by a "poision pill" requirement making the state pay for future pension enhancers rather than past practice of passing them along to local governments.
Cuomo originally hoped for $113 billion in savings, in part by giving a 401(k) option to all. But three-quarters of a chicken down the road somewhere is a lot better than no chicken at all -- especially if you had to fight the unions to get your hands on the bird.
The point is not to deprive public workers of a decent retirement -- and no one has done this. One reform halves the sick days eligible for pension credit -- down to a still-remarkable 100. No increased contribution, moreover, is required of those earning $45,000 a year or less. And remember: It's only for new hires!
These reforms "will be devastating to 99 percent of New Yorkers," said the chief of the biggest public union. Nonsense. Most hardworking New Yorkers no longer have traditional defined-benefit pensions. They can't afford -- and won't tolerate -- having to provide more generous pensions for civil servants than they get for themselves.