Unlike in some other profligate states, the main public employee pension funds in New York aren't short of money. Strict state law here requires they be kept fully funded -- which is one reason investment returns cover roughly 85 percent of costs. When there's lots of money, it can generate lots of returns.
But public employee pensions in New York are more generous than in most states, and the employer -- that's the taxpayers -- picks up more of the tab. Also, public employees here (and elsewhere) are blessed with a type of pension most private sector workers no longer have: a defined-benefit plan, which pays a predictable, set amount, leaving the risk of covering this sum to the public.
It would be wonderful if every retiree could be guaranteed a nice, monthly check paid for mostly by someone else -- on top of Social Security, an early retirement date and a bevy of possible enhancers, such as the ability to secure higher pension payouts by working a lot of overtime in the last few years of service. And don't forget great retiree health benefits.
Unfortunately, that's not possible. And with its high taxes, crumbling infrastructure and soaring health-care costs, New York can't afford such a system for government workers. Gov. Andrew M. Cuomo is proposing to tighten up the requirements for future employees, and he's right to do so.
The governor hasn't yet put out specific legislation, but he wants to raise the retirement age to 65 (from 62 for most public employees, and 57 for teachers). Early retirement, at age 55 for those willing to accept a lower pension, would end.
New employees would have to contribute twice as much of their pay -- probably around 6 percent -- a change that would put New York more in line with other states whose public employees, like ours, participate in Social Security. Vesting would take 12 years instead of 10, and egregious pension-boosting tactics such as counting overtime, unused sick time and vacation pay would be eliminated. So would the giant step that boosts pensions after 20 or 25 years on the job.
For the highest-paid state employees, such as executives and physicians, pensions would be capped based on the governor's annual pay, now $179,000. New employees would also get a choice between the standard plan and a 401(k), the kind of self-directed plan that so many workers in the private sector are struggling to fund and manage.
There are still questions to be answered by the Cuomo administration about his plan. It would save money, but it's unclear how much -- and chances are it will be less than was saved by the last round of reforms, adopted in December 2009, which took care of the lowest-hanging fruit. There's also the risk that legislators, as time goes by, will chip away at reforms to curry favor with politically powerful unions representing government employees.
For the most part, people don't get rich working for government, and public employees are entitled to good pensions. But civil servants can't expect to hold on to a level of benefits the rest of the taxpayers can't attain -- and one probably not required to keep public employees on the job. hN