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Local governments face higher pension bill

New York State Comptroller Thomas DiNapoli speaks during

New York State Comptroller Thomas DiNapoli speaks during a news conference in Albany. (Jan. 9, 2012) Credit: AP

ALBANY - Local governments were hit Friday with another big increase in the rates they will have to pay to support New York's public-employee pension fund.

The state comptroller's office, which sets the rates, announced that local governments will pay 28.9 percent on every dollar that police and fire employees earn in fiscal 2013-14 -- a jump of 12 percent from the current year -- and 20.9 percent on all other government salaries, an 11 percent increase.

That means county governments alone will pay $900 million in pension costs next year, the New York State Association of Counties said. That's more than double what they paid in 2008, just before the stock market melted down and the state pension fund lost about $45 billion.

The double-digit rate hike for the Common Retirement Fund was widely expected, given fiscal projections earlier this year. Yet local government officials said some counties -- already struggling because of the new state property-tax cap -- will have trouble making pension payments.

"Faced with a multiyear, multibillion-dollar fiscal gap and a state-imposed cap on property taxes, county governments across the state will have great difficulty making this payment," Stephen Acquario, executive director of the counties' lobby group, said.

Newsday reported earlier this year that all public entities on Long Island -- from counties and towns to villages and libraries -- would end up paying a record $2.9 billion between January 2012 and February 2013.


Officials ask for help

Estimates for what local taxpayers will have to pay to support the Teachers' Retirement System -- which is separate from the Common Retirement Fund -- are expected later this year.

Local government officials across the state have been petitioning Gov. Andrew M. Cuomo and legislators to help them meet the tax cap by reducing "mandates" -- programs the state requires but doesn't fund.

"This is bad news, another burden on the already broken back of the taxpayer and further highlights the need for real reform," Nassau County Executive Edward Mangano said of the pension rate increase.


'One more fiscal hurdle'

Smithtown Supervisor Patrick Vecchio said the increase would cost the town $1 million next year and raises taxes about $12 per household. "Every time you get a mandate that costs taxpayers money, it's very upsetting," he said.

"I think it's just one more fiscal hurdle facing Suffolk County government, which further demonstrates the need to move forward with executive budget mitigation plan, including selling the Foley nursing home," added Jon Schneider, spokesman for Suffolk County Executive Steve Bellone.

State Comptroller Thomas P. DiNapoli said the pension fund is still feeling the impact of the 2008 stock dive and it will likely get worse for at least one more year. "The rise in the employer contribution rate has slowed this year, but there will continue to be upward pressure on rates through Fiscal Year 2014-2015 reflecting the impact of that loss," he said in a statement.


Stocks tumbled in '08-'09

Pension payouts are guaranteed by the state constitution, so when stocks do poorly, as they did particularly in 2008 and 2009, local governments have to make up the difference.

The Common Retirement Fund currently is valued at $146.5 billion, according to DiNapoli. It had dipped to $110 billion in March 2009. Before the economic downturn, it was valued at about $155 billion.

"They almost lost their shirt and their pants in '08 and '09. They've got a lot of ground to make up," said E.J. McMahon of the Empire Center, an anti-tax think tank that advocates for a "defined contribution" or 401(k)-style pension system for public employees as a way to lower costs.

McMahon said local government officials need to find ways to reduce employee compensation costs to offset pension growth.

With Rick Brand, Robert Brodsky, Carl MacGowan

and Randi F. Marshall

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