Easing the state pension burden
According to the U.S. Labor Department, pension benefit payments can be suspended under certain circumstances. Credit: iStock
Local and state spending on public pensions is skyrocketing, thanks to growing payouts, the stock market tanking and the fact that local municipalities and school districts contributed little in good times.
Now, alarms are sounding. But little can be done to reduce the challenge of funding public pensions in the next five or even 10 years, no matter how many new tiers are created to control costs. That's because when a state pension tier is added (we're on our fifth now, adopted in 2009) it only affects the future pensions of employees hired after that adoption.
New York's constitution guarantees benefits granted to public servants, and those who've retired can't be cut.
Gov. Andrew M. Cuomo believes we need a Tier 6 that increases the retirement age a few years, bumps up employee contributions to the plan to around 6 percent of pay (about the national average), and eliminates overtime from the formula that defines pension benefits. He's correct.
But these new rules may only make our taxes less burdensome when a significant percentage of public employees is retiring under them.
Each of the tiers, when adopted, was presented as an affordable option that created obligations we could meet. Each, though, has turned out to be far more expensive than we would have guessed. Will we, 10, 20 and 30 years from now, be able to afford the obligations of Tier 6? With an increased employee contribution, perhaps. If not, it will soon be Tier 7, or by then, Tier 17.
