By Steve Levy
Suffolk County’s proposed operating budget is showing a tax increase in both the general and police district funds. The Town of Hempstead is seeking a 12% increase. Numerous other towns sought tax increases, as did most schools throughout Long Island.
While we question whether these increases were needed — despite the schools, county and towns sitting on a record amount of reserves left over from Covid — we cannot lose sight of the fact that these municipalities are being required to pony up more money into the state pension fund as a result of irresponsible actions by the state legislature earlier this year.
These increases are, at least in part, the direct result of the pension time bomb starting to explode.
Back in 2012, there was a recognition that public-sector pension obligations were like a train going off a cliff. So, the legislature implemented a new Tier 6 for newly hired government employees that would limit the amount of overtime that can be rolled into their pensions. It also required higher contributions from those new employees and raised their retirement age. Those reforms were supposed to save taxpayers up to an estimated $1 billion annually.
Legislators took bows as to how responsible they were. But then, when they thought no one was looking at the end of last session, the legislature folded to the pressure placed upon them by their municipal union benefactors and the reforms were watered down, or, in some cases, outright reversed. https://nypost.com/2024/03/28/opinion/ny-republicans-betray-taxpayers-in-favor-of-pricey-union-pensions/
But the give-it-away legislature wasn’t done yet. They also added a sweetener that allows final pension calculations to be based on the last three years of service, rather than the present five — which would mean having a lower average pay. https://www.empirecenter.org/publications/senate-assembly-budget-plans-include-4b-pension-giveaway.
These maneuvers will result in an additional $1.5 billion for the New York State and Local Employees Retirement System. It is likely to add up to over $4 billion in additional debt for all of the public pension systems throughout the state.
Every time pension costs go up, the state comptroller mandates that schools and local governments pay a bigger percentage into the pot. https://www.osc.ny.gov/press/releases/2024/09/dinapoli-nyslrs-announces-employer-contribution-rates-2025-26
Thus, when a newspaper reports that an employee is making $100,000, the actual cost to the taxpayer is far beyond that. First, you have to add another $30,000 for the cost of healthcare. Then, add another percentage on top of that for the employee’s eventual pension cost. For average employees, it could be as much as an additional 16.5%. For police officers, it could be as high as 33.7%. That’s up to $33,700 for the pension cost annually on top of the $100,000 salary and the $30,000 in health benefits. On a police officer’s $200,000 salary, that amount jumps to $67,400.
Our Center for Cost Effective Government warned in its white paper a few years ago that we are headed for tough times if we don’t get these pensions under control. https://www.centerforcosteffectivegovernment.org/white-paper/ We suggested totally ending the process of adding overtime into pension calculations. Doing so could save $50-$80 billion for taxpayers over the next twenty years.
Not only was our warning ignored, but the legislature made things even worse. And now you are paying for it through another tax increase.
It’s axiomatic that elected officials will continue to be free to make decisions that are contrary to the interests of the taxpayers they serve. The question is: How long will we continue to accept a system whereby legislators who sweeten the pot at the behest of their union leader benefactors will be able to accept campaign contributions from those same benefactors?
Steve Levy is Executive Director of the Center for Cost Effective Government, a fiscally conservative think tank. He served as Suffolk County Executive, as a NYS Assemblyman, and host of “The Steve Levy Radio Show.”