Pray Hochul won’t cave to union calls for a big pension giveaway

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Pray Hochul won’t cave to union calls for a big pension giveaway

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Tuesday will be the 10th anniversary of a state legislative landmark: the creation of a new public-pension “tier” reining in the explosive cost of state- and local-government retirement benefits in New York.

While Tier 6 wasn’t the “bold and transformational” breakthrough touted by then-Gov. Andrew Cuomo in 2012, it was a solid net positive for taxpayers, building on incremental changes in the Tier 5 pension reform enacted two years earlier. (Tiers 5 and 6 cover most occupations other than police and firefighters, who belong to other pension plans modified in different ways by the same legislation.)

The reforms have saved billions of taxpayer dollars for the state and local governments over the past decade — including $1 billion this year alone — plus significant added savings for New York City’s separate pension systems.

The state’s well-fed public-sector unions tried to block pension changes at every turn. Now, under the slogan “Fix Tier 6,” they’re pushing the Legislature to roll back pension reform as part of the budget for the fiscal year that starts April 1.

The “fix” sought by the 200,000-member Civil Service Employees Association and other government unions is a return to the state’s enriched pre-2010 pension plans, which (among other sweeteners) required no employee pension-fund contributions after 10 years and allowed for early retirement on full pensions as early as age 55 after a minimum 30 years of service.

Echoed by other unions, CSEA claims pension reform “has made jobs in the public sector less attractive, and has made it harder for the state and local governments to recruit and retain workers.” There’s absolutely no evidence of this, however. In fact, Tier 6 retirement benefits remain far more generous than the private-sector norm.

Andrew Cuomo
Former Governor Andrew Cuomo enacted the Tier 6 pension plan in 2012.
Gabriella Bass

One big union complaint is that workers hired since 2012 must kick in at least 3% of their salaries to pension funds, with higher-paid workers contributing as much as 6%. But taxpayers still carry a much bigger share of pension-costs – plus an open commitment to backfill any pension-fund investment losses.

Tier 5 and 6 members, like their predecessors, can look forward to generous pension payouts free of state income tax and guaranteed by the state Constitution. For an employee who retires at 63 or older after 40 years of service, the promised Tier 5 and 6 pension is 75 percent of final average salary — plus federal Social Security benefits.

Even if it’s not part of the forthcoming state budget, expect unions to keep pushing for a costly pension “fix.” In that case, the buck will need to stop with Gov. Kathy Hochul — whose election campaign already has the backing of CSEA and other unions lobbying to undo reform, and whose limited record on the pension front isn’t promising.

In December, Hochul vetoed a pension increase Cuomo also had rejected for some state parks, environmental and university police. But unlike her predecessor, she invited the affected unions to pursue pension sweeteners in upcoming contract negotiations—a dangerous precedent now technically barred by the state’s collective bargaining law.

Instead of inviting unions to reach for sweeteners at the bargaining table, Hochul should push for more pension reform.

Tiers 5 and 6 left in place a pension structure biased in favor of longer-term employees (not coincidentally, those who speak loudest in union politics), disadvantaging workers who don’t spend a full career in government.

This especially shortchanges the sizable number of teachers who leave before reaching the midpoint of their careers. A recent national study found fewer than half of New York teachers will earn as much or more in retirement benefits as taxpayers contribute on their behalf to teacher pension plans.

By contrast, State University faculty have long been able to choose well-funded, portable retirement accounts they own after just a year on the job. Tier 6 expanded this plan – but only to higher-paid, post-2012 elected officials and non-union appointees. The same option should be available to more public employees, starting with teachers.

New York needs a more affordable, financially system, offering a wider array of sound transparent retirement options — not a fix that will relight the fuse on a massive pension time bomb.

EJ McMahon is a Manhattan Institute adjunct fellow and founding senior fellow of the Empire Center, which recently published his report “Tiering Up: The Unfinished Business of Pension Reform in New York.”

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