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Pension padding - everyone is doing it, AG says

New York State Attorney General Andrew Cuomo speaks

New York State Attorney General Andrew Cuomo speaks to the media in Jericho. (June 29, 2010) Photo Credit: Howard Schnapp

Nurses do it. Toll collectors do it. Even agency directors do it: Pension padding is a common practice among government employees across New York State, says a preliminary report from Attorney General Andrew Cuomo, who announced Wednesday he will expand his probe of the practice he has called a "legal loophole" that unfairly costs taxpayers millions.

Of 50 governments in 23 counties examined by Cuomo's staff so far, 28 show a "pattern" of pension padding, the report found, one in which many employees either started accruing overtime for the first time right before they retired, or else boosted their overtime hours dramatically in their last three years. Pensions are calculated based on employees' highest-paid consecutive 12 or 36 months of employment, depending on the plan.

Cuomo - who accepted the Democratic nomination for governor in May - this year requested detailed payroll data from 64 state and local agencies and authorities that had some of the highest salary and pension costs in the state, including Nassau and Suffolk counties, the city of Glen Cove and the villages of Hempstead, Lynbrook and Old Westbury, and the Nassau Health Care Corp. Downstate governments are the focus of 23 new inquiries Cuomo announced Wednesday.

New York State has some of the highest pension costs in the nation, paying out more than $20 billion in benefits in 2008. Pension benefits paid to public employees in the state's Common Retirement fund have been increasing dramatically, from $3.5 billion a decade ago to $7.3 billion last year, the report noted.

Cuomo's report did not estimate how much pension padding, or "spiking," adds to overall costs. But it noted that employees taking part in the practice spanned 13 counties and included commissioners, directors and other agency supervisors, and a diverse assortment of occupations, including social welfare examiners, mechanics, highway maintenance workers, correction officers and civil engineers.

Among 14 of the 50 governments examined, Cuomo's office found a pattern of employees who start working substantial amounts of overtime just before retirement, when it would be likely to influence their pension benefits. One deputy commissioner went from working no overtime at all to working 1,629 hours of overtime in his final years.

At 26 of the employers, employees worked some overtime but sharply increased their hours before retirement. Those included a shovel operator whose overtime average of 144 hours spiked to 820 hours, and a supervisor whose average shot from 434 hours to 1,191 hours in the last three years.

Cuomo's preliminary report recommended a series of fixes to help prevent pension padding, including overtime caps and centralized management of overtime.

But those steps don't go far enough, said E.J. McMahon of the conservative Empire Center for New York State Policy.

"Banning the use of overtime in pension calculations would be a much more significant reform," McMahon said.

The pension probe is Cuomo's latest in a series his office began in 2008 after Newsday stories about pension abuses. The stories found private attorneys secured spots on public payrolls to get pensions and health benefits, and exposed widespread pension double-dipping among school superintendents. The stories led to sweeping pension reforms, among them a law requiring public employees to wait a year before retiring, collecting a pension and then returning to the same or similar job.

With Sandra Peddie

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