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Cuomo dares legislators in pension battle

Governor Cuomo at Molloy College talking about his

Governor Cuomo at Molloy College talking about his 2012-2013 budget and reform plan. (Feb. 2, 2012) Credit: Newsday / Alejandra Villa

Gov. Andrew M. Cuomo is daring the State Legislature to fight him on overhauling the state's $140 billion pension system.

By threatening to shut down the state government if lawmakers refuse to approve his pension reform proposal this year, Cuomo is betting on his popularity, public sentiment and his ability to negotiate political compromises in face of fierce opposition by public unions, political experts said. It's a tactic he used most recently to secure a new teacher evaluation plan.

The stakes in the battle are high for Cuomo, lawmakers, public employee unions and taxpayers.

Pension costs on Long Island and throughout the state have surged due to substantial losses that the Common Retirement Fund suffered in the economic downturn in 2008 and 2009. Average pension benefits, meanwhile, have increased at a rate faster than inflation for 20 years.

Public pension payouts are guaranteed by the state constitution, and when stocks do poorly, state and local governments must make up the difference.

Casting pension reform as the "central power struggle of Albany," Cuomo upped the ante last Wednesday, suggesting that if the legislature does not pass a budget by the April 1 deadline, he would include pension changes in emergency spending bills that must be passed to avoid a government shutdown.

"There must be pension reform in the budget," Cuomo told reporters.

Cuomo's office declined to say whether he would take the ultimate step of vetoing the entire budget if it lacked significant pension reform, or if there is room for compromise over elements of his proposal.

Legislative leaders have yet to make their positions known, but Cuomo's threat of a government shutdown has irked some critics of his pension plan, including Assemb. Peter Abbate Jr. (D-Brooklyn), chairman of the Governmental Employees Committee.

"What kind of a way is that to run a government? Every time he doesn't get something he's going to close down the government?" Abbate said. "I'm looking for a governor to run the state, not shut it down."

Others, including state Comptroller Thomas DiNapoli, have attacked the substance of the plan.

"Some local officials may be misinformed if they believe that any proposed change to the pension system now will provide them with immediate budget relief," said DiNapoli, who is the sole trustee of the retirement fund.

Fueling the fight

In his budget proposal, Cuomo called for a new Tier VI pension plan. Future government employees would have to pick between a defined benefit plan that would require greater employee contributions, or a defined contribution plan that is similar to a 401(k). Cuomo has touted the "portability" of the defined contribution plan because workers would be fully vested after one year.

The governor said his plan would save taxpayers more than $100 billion over 30 years, but his office has not provided all of the assumptions from which those savings were calculated.

"The current pension system is great for the people who are in it, but it is an abject failure for the citizens and the taxpayers of the state," Cuomo said.

Scrutiny of the pension system has intensified in recent years as costs have skyrocketed and the recession squeezed government revenues.

Barbara Bartoletti, who has spent more than 25 years observing the State Capitol as legislative director for the League of Women Voters of New York State, said Cuomo's popularity gives him a strong hand.

"The perception is that he anticipates the public will be with him on this issue and therefore if legislators shut down government over this, they will do it at their electoral peril," Bartoletti said, noting state lawmakers face re-election in November while Cuomo does not.

Public support appears to be on Cuomo's side.

"Voters overwhelmingly support controlling pension costs," said Don Levy, director of the Siena College Research Institute, which conducts monthly statewide polls. "They say the government needs to save money, and government employees need to make a greater contribution to their retirement."

A Newsday/Siena poll conducted last year found more than 70 percent of Long Island voters favor reducing retirement benefits for government workers, with one-third saying the cuts should extend to employees already on the job.

In its most recent poll, conducted Jan. 29 to Feb. 1, Siena found registered voters statewide backed Cuomo's proposal for higher retirement contributions from new state and local government workers, 69 percent to 28 percent.

The issue is critical to Long Islanders, many of whom were drawn to the public sector by the lure of taxpayer-funded pensions, which offer the promise of a robust income well after their working days are over.

It's a system that public unions and beneficiaries defend. Union officials have attacked Cuomo's proposal as an assault on the middle class and contend that a less generous pension tier for new employees just went into effect in 2010.

"What's being proposed is not a tweak and it's not a minor change," said Ken Brynien, president of the Public Employees Federation. "It's a complete overhaul."

Unions have defended traditional defined benefit plans as giving workers financial security in return for dedicating themselves to government work rather than seeking higher salaries in the private sector.

Some political experts see Cuomo's hard-line stance as a negotiating tactic and suspect a deal can be reached without a government shutdown.

"There's going to be a compromise," said Democratic political consultant George Arzt. "I think there will be pension reform. I think that both sides will give a little."

Skeptical of a war

Stanley B. Klein, a political science professor at LIU Post in Brookville, was skeptical that Cuomo and the legislature would go to war over pension reform.

"You put up a straw man and everybody says, 'You can't do that. The unions are going to kill you,' " said Klein, a GOP committeeman in Dix Hills. "But in the meantime, you made a deal with everybody."

Legislative leaders so far have refused to show their hand.

"The Assembly Democratic conference will be intensely discussing the governor's budget proposals and we will be formulating our own budget in the near future," said Michael Whyland, spokesman for speaker Sheldon Silver (D-Manhattan).

Scott Reif, spokesman for Senate Majority Leader Dean Skelos (R-Rockville Centre), said the office continues to review the overall proposal.

"Senator Skelos has consistently said that we need to enact pension reform to help local governments and school districts rein in skyrocketing pension costs," Reif said.

Skelos has generally been supportive of Cuomo's 401(k)-type proposal while Silver has said his conference has concerns.

The Senate and Assembly plan to introduce their own budget bills on March 12 and vote on them by March 22.

Cuomo's tactic -- compelling lawmakers to adopt emergency spending bills after the April 1 budget deadline has passed or face a government shutdown -- is not without precedent. Two years ago, then-Gov. David A. Paterson compelled the legislature to adopt deep spending cuts by including them in the emergency bills required to keep Albany's doors open.

A year earlier, he failed to get lawmakers to include a new Tier V pension plan as part of his 2009-10 budget, but it was passed months later in a modified form in December 2009.

While most agree that Cuomo has more political capital than his predecessor, a government shutdown could deplete that goodwill.

"Nobody wins if the government shuts down," said Hank Sheinkopf, a Democratic political strategist. "But the governor has to look like he's sufficiently powerful to force action. And then if he can't get it done then he's got people to blame."

Public pension costs: the impact on Long Island

Total bill: By February 2013, all public entities on Long Island, including counties, towns and school districts, will pay a record $2.9 billion into the state pension system. That is a 69 percent increase over the period spanning 2010 and 2011.

School districts: Next fall, Long Island districts are projected to pay $540 million into the retirement system for teachers. That could rise to $583 million in February 2013, an analysis of state records shows.

Villages: In 2010, Long Island villages made $28.9 million in pension contributions to the state. At the end of this month, a total of $52.6 million is due from villages, with another $62.8 million due in February 2013.

Libraries: In the two-year period that began in December, Long Island libraries are projected to pay $53 million into the state pension system -- more than twice the amount paid in the previous two-year period.

$100,000 pensioners: Nearly half the nonteacher public-sector retirees in New York with annual pensions of $100,000 or more had worked on Long Island, according to a Newsday analysis in October.

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