Editorial: Many roads to NY pension reform
New York Gov. Andrew Cuomo speaks to the New York Conference of Mayors in Albany to ask for their support on reform for public-worker pensions (Feb. 27, 2012). Credit: AP Photo/Mike Groll
Sometimes a little strategic flexibility is in order.
After announcing a pension reform plan for public employees, Gov. Andrew M. Cuomo is signaling that the package needn't include a 401(k)-style "defined-contribution" option after all -- just as long as the plan is adopted, and provides the needed long-term savings.
Public employee unions hate the idea that future members might be given a defined-contribution choice, and so have mounted stiff opposition to the governor's plan, which aimed to save $113 billion over 30 years by reducing pension benefits for newly hired workers all over the state. The plan got a boost yesterday when Suffolk County Executive Steve Bellone and Nassau County Executive Edward Mangano announced support.
So Cuomo has decided that flexibility makes sense. But bending on means needn't imply sacrificing ends. An optional defined-contribution plan was a great idea and is probably inevitable -- but it's not essential just now, as long as the same savings can be wrung from the traditional pension system. Saving money is the real point of the governor's plan.
None of this would have any impact on current state workers. New York's constitution prevents pension reductions for workers already on the payroll. These employees will enjoy retirement benefits that have been repeatedly -- and irrevocably -- sweetened over the years by compliant lawmakers who've quietly undone previous pension reforms. That's one reason pension contributions are soaring for governments all over Long Island. Yet changes can -- and must -- be made for workers not yet hired. A new pension "tier" for these future employees is key -- even without a defined-contribution component.
One reason is that the world has changed. Once upon a time, civil servants weren't the only ones who had nice reliable defined-benefit pensions -- to say nothing of near-free medical coverage. Legions of New York taxpayers got the same from their private-sector employers. But in the past 30 years, companies have shifted en masse to 401(k)-type plans, which put the burden on workers to save and invest for themselves. It's clear most people aren't very good at this.
It's also clear that taxpayers won't forever fund benefits for their employees that they no longer receive or can afford for themselves. As eruptions against public employees in Wisconsin and New Jersey have shown, hard-pressed taxpayers sooner or later rebel. Thankfully, Cuomo has focused on negotiating better deals at the bargaining table while avoiding the anti-union invective seen in other states. But pension change will take legislative action, and it's time for lawmakers to acknowledge the need.
The new Tier 6, as it's called, that Cuomo is proposing would hardly leave future civil servants destitute when they retire. On the contrary, it would be wonderful if every working New Yorker could look forward to such a generous pension. If that were the case, nobody would be arguing over the pension benefits enjoyed exclusively by civil servants. Meanwhile, the savings from Cuomo's new Tier 6 are needed, with or without a defined-contribution option.
