ALBANY -- Gov. Andrew M. Cuomo's proposal to allow cash-poor New York localities to lower pension payments now and pay more later has gained steam with state legislators -- to the chagrin of fiscal watchdogs.
Both the State Senate and Assembly included the so-called pension smoothing proposal in their one-house state budget resolutions. Though these are nonbinding public statements of spending priorities, the resolutions signal what issues are in the mix as lawmakers try to adopt a budget by the April 1 deadline.
One key lawmaker predicted the state budget will include some form of Cuomo's pension plan. "I think we probably will have an agreement on the governor's pension bill," Senate co-leader Jeff Klein (D-Bronx) said after meeting with Cuomo and other legislative leaders.
Klein said he backed the idea in part because it is optional. "This could be an effective tool for a locality," he said. "It's not mandatory and it could be helpful."
That could mean that whether the plan -- that fiscal conservatives have likened to a balloon payment that comes due at the end of a mortgage -- goes into effect depends on state Comptroller Thomas DiNapoli, whose approval would be needed and who has yet to comment.
The comptroller is the sole trustee of New York's $150 billion common retirement fund. Earlier this month, the Democrat told union members at a luncheon that the pension fund was not created to provide temporary relief to localities.
Cuomo, also a Democrat, has touted the plan. Lowering localities' payments to the pension fund now will pay off years later when a new, less lucrative set of public-employee pension benefits he and legislators enacted about a year ago begins to produce savings, he said.
But the idea has been derided not only by fiscal watchdogs but also Syracuse Mayor Stephanie Miner (who also serves as co-chair of the state Democratic Party), who called it a gimmick in an eyebrow-raising editorial in The New York Times.
The Senate bill would expand Cuomo's proposal by also allowing the state to participate.
Tammy Gamerman, a senior research associate with the Citizens Budget Commission, estimated the state could save about $60 million in the upcoming year by lowering the pension contribution rate. But she warned that not only could municipalities pay more later, but the proposal would jeopardize the strength of the pension fund -- which traditionally has been one of the nation's strongest.
"While it's understandable, fixing the rate really threatens the long-term financial [stability] of the retirement system -- and this happens to be one area where New York has historically had a great reputation in terms of fully funding our retirement plans," Gamerman said.
Lowering short-term pension contributions heightens the risk that bigger contributions will be needed later on if, for example, the state's investment returns are lower than anticipated.
"The more you postpone, the more risk you're taking on," said Keith Brainard, research director, of the National Association of State Retirement Administrators, whose members manage more than $2 trillion in assets in public funds.
Meanwhile, other fiscal hawks bashed the legislature for omitting from its plans Cuomo's proposal to cap binding arbitration awards at 2 percent for fiscally strained localities -- a list that likely would include Suffolk and Nassau counties.
E.J. McMahon, senior fellow at the conservative Manhattan Institute, said this was a double hit. He called pension smoothing "irresponsible."
Morris Peters, a spokesman for the state Division of Budget, said only: "Budget negotiations are ongoing."
With Yancey Roy