Governor Kathy Hochul and the state legislature had to make a choice in this year’s budget process between supporting taxpayers and supporting the special-interest unions that wished to eviscerate the pension reforms made back in 2012.
Unfortunately, they chose to side with the unions and special interests and have stuck taxpayers with an enormous bill of $500 million per year.
The majority of this $557 million annual increase will be borne by local property taxpayers on the town, county and school district levels. These local governments will have to come up with $440 million of that amount, by almost assuredly passing this enormous cost along to taxpayers.
High pension costs in New York are one of the major driving forces in increased property taxes, which make Long Island and New York State so unaffordable.
Retirees receive anywhere from 50% to 60% of their highest salaries upon retirement. Base salaries that already may be in the six figures are often increased dramatically with additional overtime, especially in the law enforcement sector.
Consequently, it is no longer unusual for public sector workers to retire with pensions exceeding $100,000 a year.
The reforms in 2012 were designed to curb this exponential escalation of pension costs and the impact it was having on property taxes.
While legal impediments made it difficult for lawmakers to retroactively change pension terms for existing employees, there was no bar to preventing changes for future employees. Thus, a new Tier 6 was created that would require all employees hired after 2012 to pay a greater percentage into their pensions, while also pushing out the retirement age and limiting the amount of overtime that could be calculated into one’s pension.
It was projected that the savings would be $500 million a year.
But 14 years later, a good bulk of the current workforce consists of these Tier 6 employees. With that kind of political clout, the union felt emboldened to pressure the governor and the legislature to reverse the changes that impacted these employees.
Not surprisingly, the governor and the legislature caved.
The retirement age for teachers was lowered to 58 from 63, while workers are now allowed to contribute less to their pensions. Additionally, the 15% cap on overtime has been raised to 25% for law enforcement employees.
Chris Koetzle, the executive director of the New York Association of Towns, told Newsday, “We are very, very concerned that this is going to be a back breaker financially for local governments.”
Indeed, it will be.