Weeks of talks led to compromise deal to boost New York State's pensions

ALBANY — Gov. Kathy Hochul stood on an Albany stage last winter and promised 15,000 public workers something they’ve wanted for almost 15 years: better pension benefits.

Ten days or so later, labor leaders delivered their opening ask: more than $1.5 billion worth of improvements.

What followed was a two-month negotiation that reshaped retirement benefits for nearly 800,000 public employees, cost taxpayers more than half a billion dollars and forced unions representing teachers, police officers, firefighters and state workers to compete over which benefits mattered most.

The final deal, tucked into the $277 billion state budget approved in May, fell far short of labor’s original request but still delivered one of the biggest pension expansions since the state scaled back benefits for anyone hired after 2012 by creating a new track known as Tier 6.

The pension sweeteners mark a major win for unions in an election year and are part of a yearslong battle that labor leaders say is far from over.

"This is the most significant Tier 6 rollback since the system was imposed in 2012, and it belongs to every member who showed up," said Melinda Person, president of the New York State United Teachers, the state’s largest teachers’ union with nearly 700,000 members. "This is a milestone, not a finish line, and we'll be back."

The final state budget allows teachers to retire at age 58 and other workers to contribute less toward the pension system. It also allows workers including police officers and firefighters to count more of their overtime earnings toward their pension benefits.

State lawmakers and union leaders say the changes are designed to help attract and retain public workers.

They affect the 787,240 workers who were hired on or after April 1, 2012, including healthcare workers at public hospitals such as Stony Brook University Hospital and Nassau University Medical Center.

With workers paying less in, the bulk of the cost, $440 million annually, will be borne by local governments and school districts — and their taxpayers. The state’s share is $118 million annually.

School and municipal leaders have taken issue with the cost, saying the changes won’t help with recruitment and retention and may use up money that otherwise could have gone toward salary increases.

"It’s just another layer of throwing more costs on local government," Chris Koetzle, executive director of the New York Association of Towns, told Newsday. The costs are expected to grow exponentially as Tier 6 members make up more and more of the workforce, he said.

This account of how the deal got done is based on interviews with labor and legislative sources, as well as a source from the Hochul administration, who were not authorized to discuss the negotiations on the record.

A decade in the making

The sixth pension tier was created in an effort to tame fast-rising pension costs. Workers in the tier receive fewer benefits, must wait longer to retire with full benefits and contribute more toward their pensions.

For years the unions have pushed to get those workers parity with Tier 4 workers, those hired between Sept. 1, 1983, and Dec. 31, 2009. They also were pushing to increase benefits for the more than 38,800 Tier 5 workers, who were hired from Jan. 1, 2010, through March 31, 2012, and have slightly better benefits.

Union leaders said increased benefits would help make public sector jobs more attractive, as employers struggle to find workers, particularly correction officers, nurses and some teaching positions.

Mario Cilento, president of the New York State AFL-CIO federation, told Newsday in February that historically there has been a trade-off, with public workers taking maybe a little less in pay than they would in the private sector in exchange for better retirement benefits. "Unfortunately," Cilento said, "Tier 6 kind of peeled that back."

The unions already won some tweaks to Tier 6 in 2022 and 2024 — both election years — reducing the vesting period, keeping contribution rates low for those earning overtime pay and increasing the level of benefits workers receive when they retire.

This year, with Hochul and all 213 seats in the State Legislature up for election, the unions mounted another push.

Big energy

The biggest hurdle the unions faced was their diversity of interests, from teachers to police officers, from health workers to those in government administrative jobs, and many of the state lawmakers themselves — all of whom have different needs.

In late fall to early December last year, labor leaders decided they needed a cohesive, energy-packed event to show unity, even before they knew what specifically they were going to ask for.

On Sunday, March 8, members from unions across the state filled the MVP Arena in Albany. Groups present included the AFL-CIO, NYSUT, the United Federation of Teachers, the state Public Employees Federation, state Professional Fire Fighters Association, state Nurses Association, New York State Troopers Police Benevolent Association and the Civil Service Employees Association.

Members were chanting and holding signs that said "Fix Tier 6," "In Solidarity" and "Tier 6 Has No Rizz." NYSUT's Person wore a bright blue suit custom-made for the occasion that said "Fix Tier 6” in yellow.

State legislative leaders and the governor spoke.

"You told us you were struggling to recruit nurses and teachers and other hardworking individuals, and we listened," Hochul told the crowd. "And after years of neglect, we said we have to lead the charge and make some changes. I'm fighting for a stronger pension system because the more we attract people, we'll be stronger overall."

A big ask

Hochul and state leaders had made affordability their priority for the year and factors kept changing, making it unclear how much the state could afford to do. Federal cuts to safety net programs shifted billions of dollars in costs to the state.

But union leaders didn’t want to pigeonhole themselves into a smaller ask if a larger one was possible. Cost estimates for "fixing Tier 6" were as high as $2.9 billion before union leaders settled on the proposal they sent the governor with the more than $1.5 billion price tag.

They called for reduced contribution rates across the board, a retirement age of 55 with 30 years of service for all members and increasing the cap on overtime pay that can be counted toward pension benefits to 30%.

The state AFL-CIO federation of 3,000 local unions was central to the discussions.

The governor’s office, which took point on negotiations, made it clear that the full ask wasn’t going to happen this year, according to an administration source.

While Hochul was on board to help workers, she and legislative leaders were also still trying to provide financial relief to municipalities like New York City — cities that as employers would have to pay for the bulk of the changes.

The governor’s office modeled different versions, from light changes to heavy, and negotiations began, with dozens of meetings over the next two months. Tier 6 changes were discussed in hotel lobbies, at conferences and in elevators.

Local government groups spoke with Hochul's team and continued to push back.

"For us, our antennas were kind of raised when they had the big rally," Koetzle said, adding that his group paid particular attention to the fact that top state leaders were there. "That’s when the conversations started between all the parties involved."

Up until then, Koetzle said, municipal groups had hoped to avoid the issue in this year’s budget. "We were consulted and impressed upon them on what the original proposal would cost," he said. "That helped to at least mitigate some of those costs."

Pencils down

Tensions were high as the state budget dragged on, weeks after the April 1 deadline.

Each union was told to choose which changes it wanted. The teachers unions, for example, wanted a lower retirement age. CSEA wanted lower contribution rates. The State Troopers wanted a lower cap on overtime.

When UFT president Michael Mulgrew heard teachers would only be allowed to retire at age 60, he got in his car and drove up from New York City to talk in person.

By May 12, a deal was near and a dollar amount was set: roughly $500 million.

Concessions were made. The final $557 million deal was struck around May 22, allowing teachers to retire at age 58 with 30 years of service instead of age 63.

Other workers, excluding teachers, won a decrease in contribution rates, with 3% being the lowest and 5.75% being the highest. Contribution rates vary, with those earning more generally paying more.

The budget increased 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. And it increased 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.

Some Tier 5 members will benefit, but not all of the changes apply to them.

In the end, not everyone was satisfied, particularly those members who aren’t allowed to retire by age 58. But much of this process was about clear communication and managing expectations within their own ranks, labor leaders said, making it clear that this was far from the last battle.

UFT leaders said in a June 12 social media post to their members: "Our work is just beginning."