Pension costs on LI to jump 30 percent in 2012

Public pension costs will increase by tens of millions of dollars for Nassau and Suffolk counties in 2012 - a 30 percent increase from 2011 - under new funding rates set Thursday by state Comptroller Thomas DiNapoli.

The move was a reaction to the economic collapse of 2008 and 2009 and erratic financial markets that caused the New York's Common Retirement Fund to fall $8 billion in value to $124.8 billion in the second quarter of 2010, DiNapoli said.

With flagging investment returns, the comptroller said state and local governments had to pick up more of the tab for constitutionally guaranteed pensions for nearly a million former employees. The bulk of the money will have to be made up by taxpayers or through budget cuts.

"Unfortunately, it takes the economy a lot longer to climb out of a hole than it takes to fall in it," DiNapoli said.

In Nassau, pension contributions would increase from $114 million in 2011 to about $147 million in 2012, a $33-million jump, according to Timothy Sullivan, deputy county executive for finance. Nassau Comptroller George Maragos called the increase "shocking," noting, "It's going to be not quite devastating - but close."

Suffolk's bill is going from $136 million in 2011 to $178.2 million in 2012, a $42.2-million increase. Suffolk County Executive Steve Levy said: "This increase is very significant, and it is a further indication that there is a crying need to change the public sector pension system."

The sting of rising pension costs could be reduced under a plan approved by the Legislature this year and signed by Gov. David A. Paterson allowing municipalities to defer 5 percent of their pension payments, DiNapoli said.

Last year, DiNapoli, the sole trustee for the fund, announced similar rate hikes for 2011.

The increases came in part because DiNapoli, on the advice of the retirement fund's actuary, Michael Dutcher, lowered his assumption from 8 percent to 7.5 percent for how much the fund's investments would generate. The rate is important because about $7.7 billion in annual pension payments are made with a mixture of investment income, taxpayer funds and employee payments.

While 8 percent is a common assumption for public pension funds, economists have long criticized it as misleading. In the past decade, New York's fund has had an actual return rate of about 4 percent on average, even as it assumed making 8 percent or more.

Even with the increased local contributions, DiNapoli said the pension will no longer be "fully funded." It will have 94 percent of the assets needed to pay its future liabilities, he said, though he stressed that does not mean it can't meet its obligations to retirees.

DiNapoli's announcement came amid an election battle with challenger Harry Wilson, who Thursday branded the rate hikes as "the completely wrong approach."