Editorial
N.Y.C. vs.
N.Y.S., the Pension Battle
Published: March 24, 2011 - New York Times
Mayor Michael Bloomberg wants New York City to take control of its own
business back from Albany, especially pension costs.
The city negotiates wages and health benefits directly with its employees’
unions. But since the 1970s fiscal crisis — when Albany took over the city’s
finances — the State Legislature and the governor have dealt with the city’s
pension benefits. The way it usually works, the mayor negotiates a pension deal,
which state lawmakers approve and then later “sweeten” for their friends in the
unions.
Albany is notoriously compliant when it comes to demands from the powerful
unions that represent the state’s public employees, which is one of the reasons
the state is in such deep fiscal trouble. Legislators have been even more
generous to city employees because the city, not the state, pays for their
generosity.
Unless New York City gets relief, the spiraling pension burden will cripple
the city’s finances for years to come. The city’s contributions to the pension
fund — for 293,000 employees and about 235,000 retirees — have risen from $1.5
billion in 2001 to an estimated $8.4 billion next year. Payouts to retirees have
nearly doubled from $6.6 billion in 2002 to more than $11 billion this year.
Those breathtaking numbers have several drivers, including Mr. Bloomberg’s
own willingness to repeatedly raise city workers’ salaries, especially for
teachers, which raises pension costs. The recession also pushed down pension
fund earnings, requiring an increase in city contributions. And retirees are
living longer.
But city officials estimate that from 1996 to 2009, the Legislature has added
$1.7 billion to the city’s annual pension benefits. The costs would be even
higher if governors had not vetoed hundreds of other sweeteners.
If Mayor Bloomberg wrestles back control from Albany, the immediate savings
for the city’s budget would be relatively small. Under the state’s Constitution,
previously approved pension deals cannot be renegotiated.
But with control, Mr. Bloomberg could immediately — without negotiations —
cancel year-end bonuses for new retirees at a savings of $200 million in this
next fiscal year. He also wants to negotiate new pension tiers for newly hired
workers. The mayor’s budget experts estimate their proposal could save $1
billion over the next eight years in pension costs.
The list of Albany’s pension “sweeteners” — and the shabby political
deal-making behind them — is long and well documented. In 2000, an election
year, the Legislature agreed to annual cost-of-living increases for retirees
that currently mean an additional $696 million annual payout. A second law that
same year cost $406 million annually. It allowed nonuniformed city workers and
teachers to stop contributing to their pensions after the first 10 years of
employment. That law also allowed many police officers and firefighters to
calculate their pensions based on their final year’s earnings — including
sudden, last-minute bursts of overtime — instead of the average of their
earnings in their final three years. The law also forced the city to double its
share of extra pension contributions for the uniforms from 2.5 percent to 5
percent.
Then there are the “heart bills,” which automatically presume that a serious
illness is caused by the job. With disability benefits, a city worker can often
retire with 75 percent of pay instead of about 50 percent, a costly difference.
For all of his tough talk, Mr. Bloomberg’s own record on
pensions has not always been stellar. In 2009, when Albany introduced a less
generous pension plan for new state employees, the mayor, who was running for
re-election, did not push hard to get the city’s new workers included. Now
safely in his third and last term, Mr. Bloomberg sounds serious. His new tiers
for new employees would be tougher than the state’s 2009 pension plan.
He has proposed allowing new teachers and nonuniformed employees to be vested
after 10 years instead of the current five. And they would have to wait until
after age 65 to receive benefits, not the current 55 to 57. (The state puts
retirement at 62 in most cases.) Overtime would not count toward the final
salary calculation the way it often does now, and pensions would be based on an
average of the last three years of salary, with overtime no longer included.
The mayor is also calling for a similarly tough new tier for new uniformed
employees — police, fire and sanitation workers. And he wants to end the “heart
bills” and cancel those year-end bonuses — currently worth up to $12,000 — for
new retirees.
These are undeniably stricter terms. But given the current fiscal crisis, and
the spiraling pension burden, they seem sensible and fair.
Gov. Andrew Cuomo has argued for less costly pension terms for new workers,
but he has not said anything about returning control to the city. He should push
the Legislature to do what Mayor Bloomberg is asking. This would not cost the
state an extra dime. And it would put the political responsibility of
negotiating with the city’s workers where it belongs: back in New York City.