ALBANY - The way New York's governments pay for their employees' pensions would be fundamentally altered under a legislative agreement that allows them to defer payments to the $132-billion pension fund and requires them to sock away money in retirement reserve accounts.

The Legislature's plan - part of its revenue-raising budget bills that could be voted on as early as Tuesday - would try to control wild fluctuations in pension costs by setting a minimum percentage of payroll that must be contributed. If the fund needed more money - as it would have this year because of stock losses - public employers could defer those payments and pay them back over 10 years at 5 percent interest, officials said.

Recently, Nassau and Suffolk both learned of $90 million in additional payments they had to make to the state Common Retirement System fund, a 40 percent spike. They saw similar surges in 2004 and 2005, the effects of the fund's investment losses during the 9/11 economic downturn, but paid almost nothing during the bull market of the late 1990s.

"We're trying to put some stability into pension costs," said Sen. Diane Savino (D-Staten Island), chairwoman of the Civil Service Committee.

Ideally, officials said, public employers would contribute less than 10 percent of their payroll to the pension fund. By statute, employees contribute 3 percent or less and the rest would come from returns on the fund's billions in investments.

Gov. David A. Paterson proposed a similar plan but it would have allowed governments to defer payments for only three years. The legislature's plan changes the system forever.

The lawmakers' plan is supported by state Comptroller Thomas DiNapoli and public employee unions, but faced opposition from Paterson and some fiscal conservatives. However, Paterson cannot use the line-item veto on the measure.

The Legislature's plan has a key element that the governor's did not in requiring counties and the state to create reserve funds during good economic times. The money will come from the minimum contribution rate set by the comptroller's office.

"The contribution rates won't be perfectly level over time, but they will be pretty close," said Dennis Tompkins, a DiNapoli spokesman.

The legislature's plan would be voluntary for county governments and the state.

There were differing views on Long Island.

Suffolk Executive Steve Levy said, "Spreading out the costs, as was allowed after the dot-com bust earlier in the decade, helps to avert a one-year rate shock."

But Nassau County Comptroller George Maragos said the debt would pose too high a burden for the county in the future. "What they're doing is similar to what the banks did: lending money to people who can't afford to pay it back," he said.

Latest videos

Newsday LogoSUBSCRIBEUnlimited Digital AccessOnly 25¢for 5 months
ACT NOWSALE ENDS SOON | CANCEL ANYTIME