ALBANY — State Comptroller Thomas DiNapoli on Wednesday reduced the future cost that local governments must pay into the public worker pension fund, potentially easing the strain on local property taxes in coming years.
DiNapoli, as the trustee of the massive pension, lowered the per-employee payment that municipalities, counties and the state must pay as the employer contribution into the retirement system. DiNapoli can reduce the direct payments by governments when investments in stocks, bonds, real estate and other areas are strong enough to allow it while still meeting the fiscal obligations to retirees.
"While the reduction in employer contribution rates is welcome news for taxpayers, our investment decisions are always made based on what is best for our 1.1 million working and retired members and their beneficiaries," DiNapoli said Wednesday.
The pension system "enjoyed the best fiscal return in its history" at 33.5% in the 2020-21 fiscal year, the pension report released Wednesday said.
The employer contribution rate beginning in 2023 will be 11.6% of payroll, down from 16.2% in the pension’s Employees Retirement System that serves most public workers. The employer contribution will be 27% of payroll, down from 28.3%, for the pension’s Police and Fire Retirement System.
The cost of public pension contributions is one of the biggest expenses for villages, towns, cities and counties and their taxpayers. At one time, dramatic declines on Wall Street created an additional strain on taxpayers during recessions by forcing higher contribution rates by municipalities. DiNapoli, however, has created a "smoothing" practice that alters the employer rate based on longer-term trends to avoid such spikes.
Because of this practice, lower employer payments aren’t immediate, but can be factored into upcoming local government budgets. The new payments begin Feb. 1, 2023, although prepayment in December 2022 would further discount a municipality’s payment.
The report said the COVID-19 pandemic was a major factor. In the past year, there were more deaths among pensioners and salary growth, which increases an employee’s pension, fell short of expectations.
In May, DiNapoli said the unexpectedly fast rebound of the economy this year from the pandemic led to the record return on investments in the 2020-21 fiscal year that ended March 31. Gains in domestic and global stocks led the way, but DiNapoli continues to warn that the stock market is volatile.