State Attorney General Andrew Cuomo speaks in Brookville about his...

State Attorney General Andrew Cuomo speaks in Brookville about his investigation on the state's pension system. (March 18, 2010) Credit: Howard Schnapp

As a taxpayer, Dominic Ciaramella is strongly in favor of the 2-percent property tax cap that was a cornerstone of Andrew Cuomo's campaign for governor.

"You've got to stop the process of taxes going higher and higher and higher - and who's giving you higher and higher and higher? Your school districts," said the retired Hicksville school district custodian, who sees almost half his $18,000 disability pension eaten up by the taxes on his Levittown home.

But as president of Nassau's Civil Service Employees Association Local 919 of retired government workers, Ciaramella says his members are anxious about the way New York's fiscal mess is casting new scrutiny on the cost of the retiree health insurance and other benefits they earned in civil service. "They're very, very much frightened - they tremble," Ciaramella said."

They're called fringe benefits, but the generous health insurance and pensions of New York's public employees have taken center stage as Governor-elect Andrew Cuomo takes office with a $9.3 billion deficit that only looks to get worse in years to come.

New York's pension system, which guarantees a steady stream of retirement income to 1.1 million state and local workers, has spiked in cost because the state's stock portfolio plummeted in 2008. And sharply rising health-care premiums are producing red ink on balance sheets at every level of government. New accounting rules have revealed the true cost of those commitments: $56 billion for the state, and more than $200 billion for governments statewide over 30 years, according to the Empire Center for New York policy.


Pensions vanishing in private sector

Civil servants have long prized these benefits as the payoff for a career yoked to lower-paying jobs, but their rapidly rising cost has led to growing resentment in an economy that has forced a relentless tide of layoffs and givebacks in the private-sector workforce. Defined-benefit pensions are disappearing from the private sector. Retiree health coverage is almost unheard of. On Long Island, even the average private-sector wage has fallen behind government pay, according to the state Labor Department.

Cuomo made his campaign a drumbeat of outrage over the job-killing effect of New York's high taxes. The business community since then has been quietly raising money for a media blitz backing his efforts to rein in costs. So when contracts for about 170,000 state workers expire at the end of March, state worker unions are bracing for an onslaught.

"We're expecting one of the most turbulent times in our history, no question about it," said Steven Madarasz, spokesman for CSEA, which represents close to 300,000 state, county and municipal workers.

Government pensions are guaranteed by the state constitution in New York, which means that they can only be made richer, and never cut back. Over the decades, the state has attempted to rein in their costs with new, less generous pension "tiers" for newly hired employees. But many of those savings were later lost when lawmakers pushed through "sweeteners" in flush years. Still, Madarasz emphasized, his members' pensions average just $14,000.

Retiree health insurance is not constitutionally protected, and some governments have attempted to cope with its soaring cost by requiring employees to pay a share, or a larger share, of the monthly premium. The state unions can't negotiate on behalf of retirees. But New York's powerful teacher's union won passage of a law requiring school districts to submit any retiree health premium changes to collective bargaining - a law other public employees have so far failed to win.


Costs seen pushing taxes higher

The so-far uncontrollable rise in health and pension costs are sure to drive local taxes through the 2-percent cap Cuomo has proposed, says the New York Conference of Mayors, which wants increased pension and health contributions by workers. The mayors conference this month asked the legislature to declare a fiscal state of emergency and freeze wages at all levels of government.

Such a freeze has rapidly gained political traction as governments watch fringe benefits drive the total cost of each employee skyward, said E.J. McMahon of the Empire Center

"The costs are just leapfrogging upon themselves," agreed state Sen. John Flanagan (R-East Northport), who has filed a freeze bill. "At some point they crowd out so much of our ability to generate programs in the public sector that the pendulum is going to swing."

Some labor sympathizers have sought to push back. William Lindsay, the Democratic presiding officer of Suffolk's legislature, wrote to Comptroller Tom Dinapoli on Wednesday, urging that New York address the spike in pension costs by abandoning the rule that its plans be 100 percent funded.

But Cuomo has been sensitive to the public perception that government workers enjoy too many perks on the backs of taxpayers. He made pension padding a key target as attorney general, launching a probe that revealed the pervasiveness of the unattractive but perfectly legal practice of piling up overtime in the final years used to calculate pensions. He has proposed a new pension Tier 6 with rules aimed at curtailing that practice for new employees.

Cuomo also has called for tighter management of the New York State Health Insurance Program, and for increased employee contributions to health insurance plans. The unions may see this as the least painful of the concessions facing them at the bargaining table this spring, said Elizabeth Lynam of the nonpartisan Citizens Budget Commission.

"I think they know the pressure's on them, they know this governor coming has to have a win-win, and I don't think they want to look like the only ones not ready to be part of the solution," Lynam said. "The costs have been growing so quickly . . . and we lag the private sector by five to seven years in terms of handling it." With Reid J. Epstein

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