Source: Final NYS budget to sweeten retirement benefits for some public workers

ALBANY — New York’s final state budget will sweeten retirement benefits for public workers hired after 2012, allowing teachers to retire at age 58 and other workers to contribute less toward the pension system, a source with the Hochul administration told Newsday.

Police and firefighters also would get to count more of their overtime earnings toward their pension benefits under the deal, the source said.

The changes mark a major win for the state’s unions in an election year.

They come with a $557 million annual price tag. The bulk of that, $440 million, will be borne by local governments and school districts — and their taxpayers. The state’s share is $118 million.

Virtually every state and local government worker will be affected, including teachers, firefighters, police and healthcare workers at public hospitals such as Stony Brook University Hospital and Nassau University Medical Center.

"We are taking an important step toward building a fairer future for the next generation of public workers. And we’re going to keep fighting," said Melinda Person, president of the New York State United Teachers, the state’s largest teachers union, representing nearly 700,000 members. 

The changes will affect the roughly 787,240 workers who were hired on or after April 1, 2012, into what is known as Tier 6.

The tier was created as lawmakers looked to tame fast-rising retirement costs. Its members currently receive fewer benefits, must wait longer to retire with full benefits and contribute more toward their pensions.

The retirement sweeteners, aimed at attracting and retaining workers, are part of the state’s approximately $268 billion state budget, which was due April 1. Lawmakers have approved three of 10 budget bills and are expected to finish voting next week.

School and municipal leaders took issue with the cost of the pension sweeteners and said they won't help with recruitment and retention efforts.

"We are very, very concerned that this is going to be a back breaker financially for local governments," Chris Koetzle, executive director of the New York Association of Towns, told Newsday.

Other measures like addressing pay or providing training to help fill specialized positions would have been more helpful, he said. "This really misses the mark. There were many other things we could have done to help," Koetzle said. 

Pension changes

Under the final deal, teachers will be allowed to retire at age 58 with 30 years of service,  instead of age 63, according to the Hochul administration source. 

Other state and local public workers, excluding teachers, will see a decrease in their contribution rates, with 3% being the lowest and 5.75% being the highest, the source said. Contribution rates vary, with those earning more generally paying more. 

The budget will also increase the amount of overtime pay that counts toward pension benefits to 25%, up from 15%, for those in the state police and fire retirement system.

It will increase the cap on the amount of overtime pay included in pension calculation from about $22,000 to $30,000 per year — a change that will largely benefit state and local correction officers and county deputy sheriffs.

The overtime changes also apply to workers in Tier 5, who were hired from Jan. 1, 2010 through March 31, 2012. There are roughly 38,870 Tier 5 workers statewide, according to the most recent data.

The changes would not generally affect members of the NYPD or FDNY pension funds because new members are generally considered Tier 3, and the city retirement systems don’t include Tier 5.

The cost

Reducing the retirement age won’t help recruit high-quality educators, said Greg Berck, assistant director of governmental relations and assistant counsel for the New York State Council of School Superintendents. 

"The costs associated with this change will hinder the ability of schools to raise starting salaries which is a more significant recruiting tool than a promise of retirement three decades in the future," he said in an emailed statement. "Most concerning, when districts hit financial challenges because of rising pension costs, it will be the Tier 6 educators that will lose their jobs first."

The final budget is expected to include more than $1 billion in funding for municipalities outside of New York City to help with rising costs, including the pension changes, according to a source in the administration.

But that aid was originally expected to make up for rising costs such as healthcare and gas prices, Koetzle said. For towns, the tax levy is the only source of revenue and that means "this is squarely dropped on the shoulders of the New York State property taxpayer in a time when affordability is a ... problem," he said. "This is going to make it worse."