New York Cuts Pension Benefits for Public Workers
New York state lawmakers approved pension reform that will save an estimated $80 billion over 30 years, largely by reducing benefits for newly hired state and local public workers, which union officials Thursday blasted as an attack on the middle class.
Governor Andrew Cuomo praised the bill enacted by the legislature with several others starting late Wednesday as key to maintaining the state’s fiscal health. The bill also provides a safeguard for municipalities that will protect them from any financial burden if the state increases their pension benefits.
Spiraling pension obligations are one of the top financial problems faced by state and local governments across the United States. For New York’s municipalities, pension costs have risen more than 650 percent since 2002, to $12.2 billion in 2012, Cuomo said.
The new law creates a sixth tier of smaller pension benefits for future state and local public workers. It raises retirement plan contributions by a sliding scale, ranging from 3 percent for employees who earn up to $45,000 a year to 6 percent for those with annual salaries of at least $100,000.
Though the governor wanted to raise the retirement age for civilian workers to 65, the new law only raises it by one year to 63. Workers who retire early will collect pensions that are 6.5 percent lower.
Further, the average salary used to calculate benefits will be the last five years of employment, instead of the last three years. And only $15,000 of a worker’s overtime can be used in this calculation, adjusted for inflation.
Cuomo, a Democrat, had repeatedly warned that pension costs could bankrupt local governments if not lowered.
“Without this critical reform, New Yorkers would have seen significant tax increases, as well as layoffs to teachers, firefighters and police,” he said in a statement.