Guv has chance at real pension reform

Gov. Andrew M. Cuomo and the State Legislature ought to strike while the iron is hot in reforming the state's pension system.

Cash-strapped local governments are straining under the increasing burden; and recession-weary taxpayers, who pay some of the highest property taxes in the country, are crying out for relief.

The point of reform isn't to punish public-sector employees; it's to rework a system that no longer makes economic or public-policy sense.

Cuomo has said that the state needs pension reform. And last week his "mandate relief task force" recommended adding a new level - Tier 6 - to the pension system.

The tier - which, if adopted, would apply to new hires at some point in the future - would require significant employee contributions to health and pension programs, a hiking of the minimum retirement age and a ban of the use of overtime payments to pump up worker pensions.

The measure, according to the task force, could save localities $50 billion over 30 years.

In 2009, amid fears that some municipalities might be facing insolvency, the State Legislature added Tier 5 - which took effect Jan. 1, 2010 - to the pension system.

Under that measure, the state doubled, to 10 years, the amount of time before public employees become vested in the pension system; raised the retirement age for most workers from 55 to 62; and required 3 percent employee contributions to their own pensions.

That was called sweeping reform, one that also was estimated to save $50 billion over 30 years.

The problem is that taxpayers want much faster relief. That many taxpayers have seen their own retirement 401 (k)s decline significantly during the recession has added fuel to the fire.

What can be done? Some thoughts:

How about moving - as in the private sector - to a 401 (k)-style system and away from a defined-benefit one?

How about, as Cuomo has promised, dealing with double dipping and overtime and other abuses used to pad public pensions?

How about greater public employee, rather than public employer, contributions to pensions and health care plans?

How about putting to public vote an amendment to the state constitution, which can occur after voted on twice by the legislature, that would end the guarantee that the state will provide a pension at a defined amount, even during tough economic times?

Costs to the taxpayers to guarantee every retiree's pensions will almost certainly go up in the coming years. And even when the contributions to the system asked of taxpayers go down, as they often do when the stock market is hot, it is unlikely contribution rates will fall back to even 6 percent.

The crisis gives the state the kind of boost it needs to make significant, and overdue, structural changes.

And everything should be on the table, including changing state laws - like one that allows public employees to keep getting step raises if contracts expire or contract talks stall - that public employers say tie their hands at the bargaining table.

Why not count the cost of pensions as part of public employee compensation instead of just looking at base pay? That would more than justify freezing public employee salaries and step increases, according to E.J. McMahon, a senior fellow at the conservative Manhattan Institute.

"That's one thing that can be done short term," he said.