Pension costs in New York represent the annual financial obligations that the State, local governments, and school districts must pay to fund retirement, disability, and death benefits for public employees. This page covers CBC’s work on Tier 6 pension reforms, legislative benefit sweeteners, early retirement incentives, unfunded pension liabilities, and the fiscal impact of pension fund investment returns.
This page was created with AICBC Insights uses AI to group, analyze and present data and recommendations from CBC's publications. Always reference the cited sources to verify important details..
State lawmakers should cut the sweetener habit and should stick to a healthy Tier 6 diet as enacted over a decade ago.
Governors should veto benefit sweeteners that are passed outside of the budget and collective bargaining processes.
Lawmakers should maintain the valuable Tier 6 reforms, which continue to offer generous defined benefits for public employees.
Key Data
As of June 2026, the state budget added $547 million to enhance pension benefits, which will pressure local governments and school districts to cut services or raise taxes.
As of March 2026, Tier 6 enhancements from 2022 and 2024 cost State and local governments $438 million annually, while a 2022 estimate for reducing progressive employee contributions exceeded $700 million annually.
As of October 2025, twelve bills passed by the legislature have fiscal notes estimating costs of at least $30.0 million immediately and $18.1 million annually thereafter.
As of October 2024, enacted Tier 6 rollbacks increased State and local costs by $438 million in the first year, while proposed rollbacks could cost billions, with one proposal carrying a $1.5 billion a year price tag.
As of March 2024, a proposed change to Tier 6 pension benefits would cost State and local governments nearly $400 million per year and increase pension contributions for public employees by $320 million next year alone.
New York's decision to enhance already generous pension benefits at a cost of $547 million creates additional financial pressure on local governments and school districts. This expenditure risks forcing these entities to either raise taxes or reduce essential services to accommodate the increased fiscal burden.
Key Data
$547 million
— The cost of enhancing already excellent pension benefits, which will pressure local governments and school districts to cut services or raise taxes.
Proposed enhancements to Tier 6 pension benefits would cost the State, local governments, and school districts billions of dollars annually, potentially driving property tax increases or service cuts. Rather than increasing pension benefits, the State should address recruitment challenges by improving pay and working conditions for hard-to-fill positions.
Recommendations related to Pension Costs
New York State should not enhance Tier 6 pension benefits.
Hard-to-fill jobs typically have lower pay and challenging work conditions; those are the issues to address.
Key Data
$438 million
— Annual cost of Tier 6 enhancements from 2022 and 2024 to State and local governments.
$700 million
— Annual cost of just one of the additional proposed changes to reduce progressive employee contributions, based on a 2022 estimate.
New York State is urged to veto 17 bills that would increase public costs by expanding pension, disability, and death benefits without providing offsetting savings or enhanced services. These legislative proposals, which include measures like reducing service requirements and extending "death gamble" benefits, would impose significant immediate and long-term financial burdens on state and local governments.
Recommendations related to Pension Costs
The Governor should veto the 17 bills that increase costs to New York State and local governments outside of the budget process without enhancing public services or paying for them with offsetting savings.
The state should reject the eight bills that expand eligibility and/or pension benefits for public employees, as these measures increase public costs without providing additional public services.
The state should reject the nine bills that would enhance disability and/or death benefits for public employees, as these expansions increase costs to the public and may encourage further costly benefit expansions.
Key Data
$30.0 million
— Estimated immediate costs of the twelve bills with complete fiscal notes.
$18.1 million
— Estimated annual costs thereafter for the twelve bills with complete fiscal notes.
$5.9 million
— Annual cost of bill S6486/A6942, which reduces the service requirement for Tier 3 members of the Unformed Sanitation Force and Uniformed Correction Service.
$280 billion is the total number of dollars held by New York City’s five pension funds over which the City Comptroller is custodian and investment adviser. The Comptroller plays a critical role in the City’s fiscal health, integrity, and accountability. In June, New Yorkers will head to the polls to…
This year, voters will choose the next New York City Comptroller, who will play a critical role holding the City Administration accountable, managing five pension funds with $280 billion in assets, and partnering in the issuance of billions of dollars of City debt. The Comptroller is important to New York City's fiscal…
New York State's recent legislative changes to pension systems, including 'sweeteners' and rollbacks to Tier 6 reforms, have significantly increased public pension liabilities and annual costs for state and local governments. These legislative actions bypass collective bargaining and budget processes, adding billions of dollars in long-term costs without providing commensurate improvements in service quality or efficiency.
Recommendations related to Pension Costs
State lawmakers should cut the sweetener habit and should stick to a healthy Tier 6 diet as enacted over a decade ago.
Governors should veto benefit sweeteners that are passed outside of the budget and collective bargaining processes.
Lawmakers should maintain the valuable Tier 6 reforms, which continue to offer generous defined benefits for public employees.
Key Data
$438 million
— The first-year annual cost increase to State and local governments from enacted Tier 6 rollbacks.
$1.5 billion
— The annual price tag of just one proposed Tier 6 rollback proposal.
$61 million
— The increase in annual pension contribution costs to State and local governments from changing the minimum vesting period from 10 to 5 years.
$377 million
— The increase in State and local government annual costs from changing the final average salary calculation from five years to three years.
$4.3 billion
— The increase in the net present value of pension benefits resulting from enacted Tier 6 rollbacks.
$6.6 billion
— The increase in the net present value of benefits from a proposed bill to reduce employee contribution rates to 3 percent for Tier 6 employees.
Twelve bills passed by the legislature would increase costs to state and local governments by expanding pension, disability, and death benefits without providing offsetting savings. These measures, which include significant first-year and recurring annual costs, should be vetoed to prevent unnecessary financial burdens on the public.
Recommendations related to Pension Costs
The Governor should veto S8472-A/A8918-A, which would establish a 20-year retirement plan for regional state park police, environmental conservation officers, forest rangers, and university police officers.
The Governor should veto S6141-B/A6508-B, which would provide additional retirement benefits for Suffolk County correction officers.
The Governor should veto S8855/A9646, which would allow certain United Federation of Teachers members to join or transfer into the New York City Teachers' Retirement System.
The Governor should veto S7498-A/A7572-A, which would allow certain Tier 4 members in New York City retirement systems to receive a service retirement benefit calculated under the Tier 4 basic plan.
The Governor should veto S7128-B/A7681-A, which would grant New York City FIRE Pension Fund members a five-year window to purchase prior time as an NYPD cadet.
The Governor should veto S7462-B/A10529, which would allow retired members of the New York State Teachers' Retirement System to suspend their retirement and return to work.
The Governor should veto S8408/A9084, which would extend the “death gamble” benefit to retirement-eligible members of the NYSLRS employed as correction officers and security hospital treatment assistants.
The Governor should veto S7567-A/A9143, which would provide an in-service death benefit for retirement-eligible members of the NYSLERS employed as State-paid judges or justices.
The Governor should veto S7224-B/A7563-B, which would extend the death gamble benefit to transit Tier 4 and Tier 6 Special Plan members of the NYCERS.
The Governor should veto S8529/A9381, which would provide presumptive eligibility for accidental disability or accidental death benefits to certain New York City deputy sheriffs for heart disease.
Key Data
$90.1 million
— Estimated cost of eight of the bills immediately.
$16.9 million
— Estimated annual cost of eight of the bills thereafter.
$70.3 million
— First-year cost of S8472-A/A8918-A for past service costs.
$5.5 million
— First-year cost of S6141-B/A6508-B for past service costs.
$10.4 million
— First-year cost of S8408/A9084 for past service costs.
$3.9 million
— First-year cost of S7567-A/A9143 for past service costs.
The proposed expansion of Tier 6 pension benefits would impose a significant, unfunded financial burden on New York City, localities, and school districts, costing nearly $400 million annually. Because existing pension plans are already more generous than most private-sector alternatives, this costly mandate should be rejected to alleviate fiscal stress.
Recommendations related to Pension Costs
The proposed change to Tier 6 pension benefits should be rejected.
Key Data
$400 million
— Estimated annual cost to the State and local governments in New York for the proposed change to Tier 6 pension benefits.
$320 million
— Increase in pension contributions for public employees next year alone due to the proposed Tier 6 benefit change.
New York State Budget Fiscal Year 2024 Major Actions and Fiscal Risks As of First Quarter Update New York City Fiscal Year 2024 Adopted Budget and Outlook
New York State is urged to veto 20 bills that would increase public employee benefit costs, including 12 that expand pension benefits, without providing offsetting savings or service improvements. These legislative proposals carry significant fiscal impacts, with 15 bills alone estimated to cost $78.6 million immediately and $21.0 million annually thereafter.
Recommendations related to Pension Costs
The Governor should veto 20 bills that enhance benefits and increase costs to New York State and local governments outside of the budget process.
The Governor should veto the bills because the lack of a complete fiscal note for five bills is sufficient basis for rejection.
The Governor should veto the bills because granting targeted benefit enhancements not only increases costs, but also may encourage further expansions that also increase the public’s costs.
Key Data
$78.6 million
— Estimated immediate cost of 15 bills that enhance benefits and increase costs.
$21.0 million
— Estimated annual cost of 15 bills that enhance benefits and increase costs.
$55.6 million
— Estimated immediate past service cost for the 20-year retirement plan for certain State law enforcement positions.
$15.2 million
— Estimated immediate past service cost for extending a one-year final average salary calculation to Tier 6 members of the Police and Fire Retirement system.
$3.9 million
— Estimated annual cost for amending the pension structure of vested automotive members of the New York City Employees’ Retirement System.
$3.6 million
— Estimated immediate past service cost for raising the age at which ordinary death benefits are reduced for active employees.
New York State should veto 21 legislative bills that would increase pension and disability benefit costs for state and local governments without providing enhanced services or offsetting savings. These proposals, which bypass standard budget negotiations and collective bargaining, would impose immediate and recurring financial burdens on taxpayers.
Recommendations related to Pension Costs
The Governor should veto S4719A/A1414A, as well as 20 other bills that would enhance pension or disability benefits.
The State should avoid granting targeted benefit enhancements that increase costs to New York State and local governments outside of budget negotiations and/or collective bargaining processes.
Key Data
$64.1 million
— Immediate cost of the 15 bills with fiscal notes.
$7.8 million
— Annual cost thereafter for the 15 bills with fiscal notes.
$48.2 million
— First-year cost of S4523/A6457 establishing a 20-year retirement plan for certain State law enforcement positions.
$9.5 million
— First-year cost of S6690/A7464 requiring New York City paraprofessionals to join the Teachers Retirement System.
$1,270,000
— One-time past service cost of S6710/A7342 regarding disability benefits for sheriffs and correction officers.
$930,000
— One-time past service cost of S4441/A7905 increasing the in-service death benefit for Suffolk County correction officers.
The next New York City Comptroller will play a critical role not only in holding the next Administration and agencies accountable, investing and managing five pension funds with $248 billion in assets, and partnering in $13 billion City debt issuance, but also in spotlighting and promoting New York City’s fiscal…
Early retirement incentives often prove more costly than attrition or layoffs, as they frequently involve significant pension benefit boosts and lump-sum payments that can negatively impact long-term fiscal stability. Analysis of such programs reveals that they often result in unneeded expenses for employees who would have retired regardless, while potentially reducing pension fund funding ratios.
Recommendations related to Pension Costs
The City should reduce its workforce through attrition and not pursue the ERI in light of the City’s fiscal stress and the availability of other options to balance the budget.
If localities are considering an ERI, it is important to do a thorough analysis of the costs and benefits and commit to a strict hiring freeze, or the ERI could actually cost more than expected.
Key Data
$110,000
— Average additional pension contribution per retiree estimated by the Actuary for the City of New York.
$1.1 Billion
— Incentive cost of the ERI proposal.
$5.9 Billion
— Potential five-year salary savings if positions are kept vacant.
32 percent
— Portion of the ERI incentive cost likely to be an unneeded expense flowing to employees who would have retired anyway.
90.1 percent
— Funding ratio of the Los Angeles pension fund before the Great Recession.
73.1 percent
— Funding ratio of the Los Angeles pension fund now.
Early retirement incentives are a less cost-effective strategy for workforce reduction than natural attrition, as they increase pension costs by $1.1 billion and provide unneeded payments to employees who would have retired regardless. Relying on attrition instead of these incentives could result in $4.3 billion in net savings over five years, which is 32 percent higher than the savings achieved through an early retirement program.
Recommendations related to Pension Costs
In light of the City’s fiscal stress and the availability of other options to balance the budget, the City should reduce its workforce through attrition and not pursue the ERI.
Key Data
$110,000
— Estimated cost per participant over five years for the proposed early retirement incentive.
19 percent
— Portion of the City’s salary and benefit savings that would be offset by the cost of the early retirement incentive.
$1.1 billion
— Estimated increase in pension costs over five years resulting from the early retirement incentive.
$350 million
— Estimated portion of early retirement incentive costs that would be an unneeded expense because employees would have retired anyway.
32 percent
— Percentage of retirements that would have occurred without the early retirement incentive, based on historical data.
$4.3 billion
— Projected net savings over five years if the City relies on attrition rather than early retirement incentives.
New York City's municipal labor costs, including significant pension contributions and health insurance benefits, require structural reforms to achieve necessary budget savings without resorting to layoffs. By modernizing benefit structures and adjusting work rules, the city can address its fiscal crisis while maintaining essential services.
Recommendations related to Pension Costs
The City should seek State legislation to eliminate the VSFs and have the assets transferred to the main pension funds.
The City should reduce overtime for skilled trades and uniformed employees through the implementation of overtime caps, as including overtime earnings in pension calculations provides an incentive for senior, more highly paid employees to seek overtime work as they near retirement.
The City should reform or eliminate the TDA because the fund is highly leveraged, heightens the vulnerability to market losses, and threatens the ability to provide pension payments.
The City should reduce or eliminate City contributions to union annuity funds, which are negotiated with each union and are in addition to the nearly $10 billion in pension contributions made to the City.
Key Data
$9.9 billion
— Projected personnel costs for pensions in fiscal year 2021.
$1.5 billion
— Total transfers from pension funds to VSFs in fiscal year 2018.
65.4 percent
— Funded ratio of the FIRE pension fund as of fiscal year 2019.
82.2 percent
— Funded ratio of the POLICE pension fund as of fiscal year 2019.
$4.9 billion
— Estimated assets of the police VSF.
New York City faces significant fiscal risks regarding its pension funds, which are actuarially determined based on a 7 percent investment return assumption. If investment returns fall short of this target, the city is required to make up the difference through increased contributions, potentially costing hundreds of millions of dollars annually in future fiscal years.
Key Data
$259 million
— Required increase in City pension contributions in fiscal year 2022 if funds suffer a 10 percent decline.
$518 million
— Required increase in City pension contributions in fiscal year 2023 if funds suffer a 10 percent decline.
$777 million
— Required increase in City pension contributions in fiscal year 2024 if funds suffer a 10 percent decline.
7 percent
— Assumed annual investment return rate used to determine budgeted contributions for the City's five pension funds.
10 percent
— Hypothetical decline in pension fund value used to calculate potential increases in City contributions.
18 percent
— Loss suffered by the City's pension funds during the 2008 recession in fiscal year 2009.
Nineteen proposed bills would expand pension and disability benefits for various public employees, creating significant new costs for New York State and local governments. These legislative changes threaten to increase taxpayer burdens by adding millions in immediate past service costs and annual contribution requirements.
Recommendations related to Pension Costs
Governor Cuomo should veto the 19 bills that would increase pension and disability benefit costs for the state and local governments.
The state should reject legislation that creates new, unfunded pension liabilities and benefit sweeteners.
Policymakers should avoid enacting bills that increase taxpayer-funded retirement benefits without a clear fiscal plan.
Key Data
$41.1 Million
— The estimated cost for establishing a 20-year retirement plan for law enforcement members under bill A4431/S5207.
$15.7 Million
— The estimated cost for requiring New York City paraprofessionals to join the Teachers' Retirement System under bill A7874-A/S5905-A.
$5.6 Million
— The estimated cost for allowing retirement credit for New York City Police Department Cadet Program time under bill A7620-A/S5903-A.
$2.760 Million
— The estimated cost for allowing Tier 6 uniformed court officers to retire without early age reduction under bill A5940/S3659.
$2.090 Million
— The estimated cost for granting enhanced disability benefits to Nassau County ambulance medical technicians under bill A5324/S5133.
$1.520 Million
— The estimated cost for allowing Nassau County sheriff and correction officers to receive performance of duty benefits under bill A5021/S3946.
New York State is considering 189 legislative bills that would expand pension benefits, health insurance, and leave policies for public employees, with several proposals carrying significant fiscal impacts. These potential benefit sweeteners include measures that would cost hundreds of millions of dollars, such as increasing base retirement allowances and enhancing Tier 6 pension benefits.
Key Data
$942.6 Million
— The increase in the base of computation for base retirement allowances for New York State Teachers, State and local police and fire, and New York City retirement systems.
$149 Million
— The immediate past service cost for increasing Tier 6 pension benefits from 35% plus 2% for each year of service in excess of 20 years to 40% plus 2% for each year of service in excess of 20 years.
$59.3 Million
— The immediate past service cost for calculating the final average salary for elected or appointed judges of the New York State Unified Court System as the last year's salary.
$57.6 Million
— The annual cost increase for establishing an age 55/25 temporary retirement incentive for certain public employees.
$41.1 Million
— The cost for establishing a 20-year retirement plan for members or officers of law enforcement, including DEC, regional state park police, and university police officers.
$24.9 Million
— The additional annual costs in 2020 for calculating pensions for New York City police officers serving 25 years as if they were a detective for two years at the highest rate of pay.
The 2019 Benefit Sweetener Scorecard tracks 189 legislative bills that would increase public employee benefits, including pensions, disability, and health insurance. These proposed changes would impose significant long-term fiscal burdens on New York State and local governments by expanding retirement and disability payouts.
Key Data
$942.6 million
— Increases base of computation for base retirement allowance from $18,000 to $21,000 for cost of living adjustments of New York State Teachers, State and local police and fire, and New York City retirement systems.
$149 million
— Increases Tier 6 pension benefits from 35% plus 2% for each year of service in excess of 20 years to 40% plus 2% for each year of service in excess of 20 years.
$59.3 million
— Calculates FAS for elected or appointed justice or judge of NYS Unified Court System as last year's salary, instead of using the three-year average that applies to all other retirees.
$57.6 million
— Establishes an age 55/25 temporary retirement incentive for certain public employees.
$41.1 million
— Establishes 20-year retirement plan for members or officers of law enforcement, includes every non-seasonally appointed sworn member or officer in DEC, the regional state park police, and university police officers.
$30.1 million
— Increases defined benefit COLA for New York State public retirement systems.
The 2019 legislative session saw the introduction of 189 bills aimed at expanding public employee benefits, including numerous proposals that would increase pension costs for the state and local governments. These benefit sweeteners, if enacted, would impose significant long-term financial burdens on the public retirement systems and taxpayers.
Key Data
$942.6 Million
— Estimated cost of increasing the base retirement allowance for New York State Teachers, State and local police and fire, and New York City retirement systems.
$149 Million
— Immediate past service cost of increasing Tier 6 pension benefits from 35% plus 2% for each year of service in excess of 20 years to 40% plus 2% for each year of service in excess of 20 years.
$59.3 Million
— Immediate past service cost of calculating final average salary for elected or appointed justices or judges of the NYS Unified Court System as the last year's salary.
$57.6 Million
— Annual cost increase of establishing an age 55/25 temporary retirement incentive for certain public employees.
$41.1 Million
— Immediate past service cost of establishing a 20-year retirement plan for members or officers of law enforcement, including DEC, regional state park police, and university police officers.
$30.1 Million
— Present value of benefits increase for increasing the defined benefit COLA for New York State public retirement systems.
Governor Cuomo vetoed several bills that would have increased public employee and retiree benefits, imposing significant additional costs on state and local governments. These measures included enhancements to disability benefits, death benefits, and retirement age adjustments that would have collectively added millions to taxpayer-funded pension and benefit obligations.
Recommendations related to Pension Costs
The Governor should veto legislation that increases public employee and retiree benefits to avoid imposing significant additional costs on state and local governments.
Policymakers should reject bills that enhance in-service death benefits, as these create substantial one-time past service costs.
The state should oppose measures that expand accidental disability benefits, which increase annual contributions and retrospective payments for participating entities.
Legislators should avoid removing limits on overtime pay used for calculating final average salaries in retirement plans, as this drives up annual pension costs.
The state should refrain from lowering normal retirement ages or reducing benefit reductions for early retirement, as these changes create significant retroactive and annual costs.
Key Data
$13.2 Million
— One-time past service cost associated with enhancing in-service death benefits for State correction officers.
$4.70 Million
— Total cost associated with removing the limit on inclusion of overtime pay for calculating final average salary for certain transit employees.
$2.42 Million
— Combined annual contributions and immediate past service cost for accidental disability retirement benefits for law enforcement and park police.
$1.50 Million
— Total cost, including annual and one-time retroactive expenses, for allowing certain court officers to retire without early age reduction.
$850,000
— Annual cost increase resulting from removing the limit on overtime pay for calculating final average salary for Tier 6 transit employees.
$1.12 Million
— One-time retroactive cost for allowing certain court officers to retire without early age reduction upon attaining 30 years of service.
New York City's pension systems face a $56.2 billion unfunded liability, requiring significant annual contributions that are projected to reach $10.4 billion by fiscal year 2022. To ensure long-term fiscal stability, the city must maintain its funding commitment while opposing benefit enhancements and reforming costly provisions like overtime inclusion and the teachers' tax-deferred annuity.
Recommendations related to Pension Costs
The City is on a path to fully funding the pension liability by 2034 and should maintain that commitment.
Enhancements to pension benefits, considered by the State Legislature annually, should be opposed.
The City should advocate for legislative changes that focus on reducing the greatest cost drivers of benefits and risk factors to the funds.
The inclusion of all overtime hours worked in pension calculations for uniformed employees should be amended for new employees.
The City should seek legislation to change the Tax Deferred Annuity benefit for all TRS members.
Key Data
$195.1 billion
— Cumulative pension liability estimated by the Chief Actuary in fiscal year 2017.
71.2 percent
— Funded status of the City's pension liability in fiscal year 2017.
$56.2 billion
— Unfunded pension liability as of fiscal year 2017.
$9.9 billion
— Pension contributions in the fiscal year 2019 operating budget.
$10.4 billion
— Projected pension contributions for fiscal year 2022.
New York City's fiscal year 2019 budget allocates nearly $10 billion for public employee pensions, a figure projected to grow steadily over the next decade. Proposed legislation to increase pension benefits for police and firefighters would add $20 million in costs next year, threatening to divert funds from other essential city services.
Recommendations related to Pension Costs
The State Legislature should reject bills that would hike the cost of pensions for NYC police and firefighters.
The City Council and the State Legislature should not pass unwarranted pension sweeteners that increase costs for taxpayers.
Key Data
$10 billion
— Amount devoted to pensions for public employees in the fiscal year 2019 budget.
$1.8 billion
— Contributions to the pension funds in fiscal year 2003.
$8.0 billion
— Contributions to the pension funds in fiscal year 2012.
$20 million
— Estimated cost of one proposed pension bill next year.
$74,500
— Average annual pension for a recently retired NYC police officer.
$118,000
— Average annual pension for a recently retired firefighter.
The veto of several bills aimed at expanding retirement and disability benefits for public employees prevented over $21 million in immediate pension-related costs. These measures would have increased death benefits, accidental disability payouts, and early retirement options for various groups, including correction officers and police.
Key Data
$13.20 Million
— One-time past service cost for enhancing the in-service death benefit for state correction officers.
$2.42 Million
— Increased annual contributions and immediate past service cost for accidental disability retirement for law enforcement and forest rangers.
$4.70 Million
— Past service and first-year costs associated with removing the limit on overtime pay for calculating final average salary for certain transit authority employees.
$1.50 Million
— Annual and one-time retroactive costs for allowing uniformed court officers to retire without early age reduction.
In 2018, several legislative proposals that would have increased public employee pension and benefit costs were vetoed, including measures that would have expanded accidental disability benefits and removed overtime caps for certain employees. These vetoed bills represented millions of dollars in potential new fiscal obligations for the state and local governments.
Key Data
$13.2 Million
— The one-time past service cost for the enhanced in-service death benefit for state correction officers.
$2.42 Million
— The combined annual contributions and immediate past service cost for accidental disability retirement for law enforcement and park police.
$4.70 Million
— The annual cost increase from removing the limit on overtime pay for calculating final average salary for Tier 6 New York City Transit Authority employees.
$1.50 Million
— The annual and one-time retroactive costs for allowing Tier 6 uniformed court or peace officers to retire without early age reduction.
Numerous legislative proposals aimed at enhancing retirement benefits for various public sector employees were vetoed, preventing significant one-time and recurring costs to the pension system. These proposed enhancements, which included changes to disability benefits and retirement age requirements, would have imposed millions of dollars in additional fiscal burdens.
Key Data
$13.20 Million
— One-time past service cost associated with the enhancement of in-service death benefits for state correction officers.
$2.42 Million
— Combined annual contributions and immediate past service costs for accidental disability retirement benefits for law enforcement and related personnel.
$4.70 Million
— Past service and first-year costs associated with removing the limit on overtime pay for calculating final average salary for certain transit authority employees.
$1.50 Million
— Annual and one-time retroactive costs for allowing specific court and peace officers to retire without early age reduction.
17% is the increase in the average bonus paid by Wall Street in 2017, bringing the average bonus to more than $161,000. NYS Comptroller Tom DiNapoli discusses Wall Street, the State and City budgets, State pension funds and more in remarks to CBC and a Q & A with Ben…
The New York City Teachers' Retirement System's Tax Deferred Annuity guarantees a 7 percent return to participants, a policy that costs taxpayers $1.2 billion annually due to the gap between this guarantee and actual market interest rates. This arrangement creates a significant financial burden and introduces risky leveraging practices that threaten the long-term viability of the teachers' pension system.
Recommendations related to Pension Costs
The unique, and uniquely expensive, arrangement for the teachers’ TDA plan should be reformed.
The most direct way to make the change would be to eliminate the TDA and transfer its assets and participants to OLR’s plan.
A more gradual change would be to require only newly hired teachers to use the OLR plan, but to reform the TDA plan serving current teachers and retirees.
The fixed income option should be converted to choices comparable to those offered in the OLR plan – a government bond fund and a corporate bond fund with returns based on prevailing interest rates.
If the city’s elected leaders and taxpayers want to provide teachers, and other municipal employees, with a more secure investment option for their deferred compensation than is available in the OLR plans, they should consider the approach used by the federal government.
Key Data
$1.2 billion
— Annual cost to taxpayers for the TDA guarantee in fiscal year 2015.
7 percent
— Guaranteed investment return for TDA participants.
$18.7 billion
— Amount of money in the fixed fund in 2015.
66 percent
— Percentage of total TDA assets in the fixed fund in 2015.
$4.5 billion
— Potential loss on investments on behalf of TDA plan participants if the market declined by 24.3 percent.
$63 billion
— Total investments of the QPP and TDA fixed return funds in 2015.
The state is urged to veto a series of legislative bills that would expand retirement and disability benefits for various public employees, as these measures would erode the fiscal savings achieved by the Tier 6 pension reforms. These proposed benefit enhancements, which include increased disability coverage and early retirement incentives, would impose significant past-service and annual costs on state and local governments.
Recommendations related to Pension Costs
The Governor should veto A711B/S1411B, an expensive enhancement to volunteer firefighter benefits.
The Governor should veto the 15 other bills passed by the legislature that provide expensive enhancements to government employee and retiree benefits to preserve fiscal restraint.
Key Data
$13.7 million
— Past service costs for A5133a/S4077, which would enhance death benefits for State correction officers who are retirement eligible but die before retiring.
$8.9 million
— Immediate past-service cost for A7185A/S5484A, which provides a special accidental death benefit for uniformed New York City sanitation employees.
$6.8 million
— Annual cost for A7185A/S5484A, which provides a special accidental death benefit for uniformed New York City sanitation employees.
$1.75 million
— Immediate past service cost for A7135/S5704, which increases disability benefits for various ambulance medical technician titles within Nassau County.
$1.15 million
— Past-service costs for A7134/S5130, which increases disability payments for Nassau County sheriffs, deputy sheriffs, under sheriffs, and correction officers.
$394,000
— Past service costs for A3332/S3670, which allows Tier 6 uniformed court officers and peace officers to retire early.
Uniformed overtime in New York City is a significant fiscal challenge, with fringe benefits including pensions exceeding 65 percent of base pay for uniformed workers. To address these costs, the City should consider capping or eliminating overtime earnings in the calculation of final average salary for pensions.
Recommendations related to Pension Costs
The City should consider capping or eliminating overtime earnings in calculating final average salary for pensions.
Key Data
65 percent
— Fringe benefits, including pensions, exceed 65 percent of base pay for uniformed workers.
New York City's Teachers' Retirement System guarantees a 7 percent investment return on its Tax Deferred Annuity fixed fund, a policy that cost taxpayers $1.2 billion in 2015. This arrangement creates a significant financial burden and risks the viability of the pension system through excessive leveraging, necessitating a transition to market-based investment options.
Recommendations related to Pension Costs
The most direct way to make the change would be to eliminate the TDA and transfer its assets and participants to the OLR's plan.
A more gradual change would be to require only newly hired teachers to use the OLR plan, while reforming the TDA plan serving current teachers and retirees.
The fixed income option should be converted to choices comparable to those offered in the OLR plan—a government bond fund and a corporate bond fund with returns based on prevailing interest rates.
If the city’s elected leaders and taxpayers want to provide teachers with a more secure investment option, they should consider the approach used by the federal government, which offers a voluntary deferred compensation plan with market-based returns.
Key Data
$1.2 Billion
— The amount of taxpayer subsidy for the TDA fixed return fund in fiscal year 2015.
7.0 percent
— The guaranteed interest rate on the TDA fixed fund option for most participants.
$18.7 billion
— The amount of money in the TDA fixed fund in 2015.
42 percent
— The level of leveraging of TDA funds in 2015.
$238 million
— The taxpayer subsidy for the TDA fixed return fund in fiscal year 2007.
36 percent
— The portion of the total taxpayer contribution to the TRS QPP that the 2015 taxpayer subsidy equaled.
New York State is considering ten bills that would expand government employee and retiree benefits, including early retirement and disability enhancements, which would erode fiscal savings. These legislative changes threaten to increase public pension costs and undermine the fiscal restraint achieved through recent reforms.
Recommendations related to Pension Costs
The Governor should veto the 10 bills passed by the legislature that are expensive enhancements to government employee and retiree benefits.
The Governor should reject legislation that would eliminate required employee contributions in the New York State Retirement System and the Local Police and Fire Retirement System.
The Governor should veto bills that would allow counties to offer correction officers and deputy sheriffs a pension equal to 50 percent of salary after 20 years of service regardless of their age.
The Governor should veto legislation that would increase payments for total disability benefits to $600 from $400 per week for volunteer firefighters and ambulance drivers.
The Governor should reject bills that would extend the deadline to file for accidental disability retirement benefits from two to five years for firefighters across the State.
The Governor should veto legislation that would provide cash and medical benefits for State parole officers injured in the line of duty equal to full salary.
The Governor should veto bills that would expand the presumption that a medical condition was caused by public sector employment to include heart disease for certain officers.
The Governor should veto legislation that would eliminate restrictions on transferring between New York City public retirement systems.
The Governor should veto bills that would allow certain members of the New York State Retirement System and the Local Police and Fire Retirement System to opt out of Tier 3 and into Tier 5.
The Governor should veto these bills to preserve the fiscal restraint that has been sought over the last five and a half years.
Key Data
6.6%
— The amount of salary costs shifted from employees to state and local taxpayers by eliminating required employee contributions.
50%
— The pension percentage of salary offered to correction officers and deputy sheriffs after 20 years of service under the proposed legislation.
$100,000
— The cost to the State in the first year for allowing State Court peace officers to retire after 30 years of service at age 55.
$600
— The proposed increased weekly payment for total disability benefits for volunteer firefighters and ambulance drivers.
$400
— The previous weekly payment for total disability benefits for volunteer firefighters and ambulance drivers.
$244,000
— The cost for the individual known to be impacted by the legislation extending the deadline to file for accidental disability retirement benefits.
The State Legislature has passed ten bills that increase pension and disability benefits for various public sector employees, including police, firefighters, and correction officers. These legislative changes are expected to increase public costs without providing corresponding improvements in taxpayer services, prompting calls for a gubernatorial veto.
Recommendations related to Pension Costs
The Governor should veto the ten bills that provide expensive benefit enhancements to public sector workers and retirees without improving services for taxpayers.
Key Data
$6.1 million
— The cost in 2017 for the bill increasing disability payments for New York City firefighters.
$12.6 million
— The annual cost by 2021 for the bill increasing disability payments for New York City firefighters.
75 percent
— The current disability benefit level for injured state police officers and correction officers.
20-year
— The special retirement plan offered to correction officers and deputy sheriffs.
Legislative proposals to increase disability benefits for uniformed employees carry significant fiscal costs, with some bills requiring up to $39.1 million in immediate budget increases and over $889 million in long-term actuarial contributions. These legislative changes aim to restore prior benefit levels and add new injury presumptions for police, fire, sanitation, and correction employees.
Key Data
$889.3 Million
— Actuarial present value of NYC contributions for fiscal year 2019 associated with bill S5656.
$39.1 Million
— Fiscal year 2015 budget increase associated with bill S5656.
$850.2 Million
— Actuarial present value of NYC contributions for fiscal year 2019 associated with bill A6046/S4269.
$37.8 Million
— Fiscal year 2015 budget increase associated with bill A6046/S4269.
$849.9 Million
— Actuarial present value of NYC contributions for fiscal year 2019 associated with bill S3966.
$37.6 Million
— Fiscal year 2015 budget increase associated with bill S3966.
State legislators introduced over 50 bills during the 2015 session that would enhance public employee pensions and benefits, threatening the savings achieved by the 2012 Tier VI reforms. To protect these fiscal gains, the Governor is urged to veto four specific bills that would increase the cost of retirement benefits.
Recommendations related to Pension Costs
The Governor should veto A7490/S3010 to prevent an increase in the cost of public employee retirement benefits.
The Governor should veto A6771A/S4907 to prevent an increase in the cost of public employee retirement benefits.
The Governor should veto A5327C/S3948B to prevent an increase in the cost of public employee retirement benefits.
The Governor should veto A7547/S5785 to prevent an increase in the cost of public employee retirement benefits.
Legislators should ensure that 'sweeteners' are not permitted to undo the savings achieved by the 2012 Tier VI pension reforms.
Key Data
50
— Number of bills introduced during the 2015 session to enhance state and local government employee pensions and benefits.
2012
— The year the Tier VI pension reforms were enacted, which began generating savings for state and local government employers.
New York State legislators are considering over 50 bills that would increase taxpayer costs by at least $140 million by enhancing public employee pension and benefit packages. These proposals threaten to erode previous pension reforms and add significant financial burdens to state and local governments.
Recommendations related to Pension Costs
The legislature should reject the proposed bills because they would add to already costly pension expenses for the State and for local governments.
State lawmakers must ensure that these benefit sweetener bills do not advance to the Governor’s desk.
Legislators should avoid passing bills that erode the landmark pension reforms enacted in 2012.
Key Data
$140 million
— The collective increase in annual costs to New York taxpayers from the proposed benefit bills.
$40 million
— The first-year cost of proposal A.8032/S.5656, which improves disability benefits for recently hired employees.
$40 million
— The upfront cost of bills A.7801 and S.5245, which improve death benefits for retirement-eligible State correction officers.
$14 million
— The cost of bill A.5596/S.4644, which would allow Tier 3 and 4 retirees who retired prior to 1999 to be reinstated in earlier tiers.
$8.4 million
— The cost of bill S.3919, which enhances cost-of-living adjustments for retirees.
$1.8 million
— The cost of bill A. 6771A/S. 4907, which would enhance retirement plans of uniformed court or peace officers.
The 2015 Disability Benefit Scorecard outlines the significant fiscal impact of various legislative proposals aimed at enhancing disability benefits for New York City's uniformed employees. These proposed changes, which include restoring presumptions of on-the-job injury and increasing benefit calculations, would result in substantial increases to both immediate budget expenditures and long-term actuarial pension contributions.
Key Data
$889.3 Million
— Actuarial present value of NYC contributions for the disability benefit provisions in bill S5656.
$850.2 Million
— Actuarial present value of NYC contributions for the disability benefit provisions in bill A6046/S4269.
$622.9 Million
— Actuarial present value of NYC contributions for the disability benefit provisions in bill A5295.
$39.1 Million
— FY2015 budget increase associated with the disability benefit provisions in bill S5656.
$37.8 Million
— FY2015 budget increase associated with the disability benefit provisions in bill A6046/S4269.
$37.6 Million
— FY2015 budget increase associated with the disability benefit provisions in bill S3966.
The state has deferred $3.2 billion in required pension payments and proposes an additional $395 million in borrowing for fiscal year 2016. These deferrals should be rejected because the state's fiscal condition has improved and it currently holds surplus resources.
Recommendations related to Pension Costs
The state should reject the proposal to defer pension fund contributions, as further deferral is unwarranted in a year when state coffers are awash in surplus resources.
Key Data
$3.2 billion
— Amount of required pension payments the State will have deferred by the end of the current fiscal year.
$395 million
— Additional borrowing proposed in the fiscal year 2016 Executive Budget for pension fund contributions.
New York State's practice of borrowing from public employee pension funds to cover budget gaps creates long-term fiscal risks and interest costs that outweigh short-term relief. Instead of continuing this amortization, the state should utilize its $5.4 billion bank settlement windfall to repay existing pension liabilities and ensure the long-term health of the retirement system.
Recommendations related to Pension Costs
The State should end the practice of borrowing from pension funds, not extend it, and use available bank settlement funds to reduce the outstanding liability from $2.5 billion in past borrowings.
The State’s first commitment should be to do no more harm and reverse the planned $713 million pension borrowing for this year and the proposed $395 million deferral next year.
A portion of the State’s $5.4 billion windfall from bank settlements should be allocated to early repayment of prior-year amortizations.
Ending the pension borrowing and reducing the State’s liability will avert further risk to New York’s ability to fully fund its pension obligations and provide needed services in the event of a future recession.
Key Data
$5.4 billion
— Unexpected revenue from bank settlements available to the state.
$1.8 billion
— Amount the Executive Budget proposes to borrow from public employee pension funds in coming years.
$2.5 billion
— Outstanding liability from past pension fund borrowings.
$713 million
— Amount the State will defer in pension payments this year.
$1.1 billion
— Total deferrals planned from fiscal year 2016 through 2020.
$780 million
— Total interest costs the state will incur under the Executive Budget proposal.
New York City's Variable Supplement Fund payments, known as 'Christmas bonuses' for retired uniformed officers, drain hundreds of millions of dollars from pension funds annually and reduce overall investment returns. Eliminating these non-constitutionally protected payments would improve the fiscal health of the pension system and reduce the burden on city taxpayers to cover pension liabilities.
Recommendations related to Pension Costs
The Mayor and City Council should make phasing out or eliminating the Variable Supplement Fund a priority on their legislative agenda in Albany.
The City should gradually eliminate these unusual pension bonuses for retirees to enhance the fiscal condition of the pension funds and reduce the required contributions from taxpayers.
Key Data
$12,000
— The annual check amount provided to eligible retired New York City police, fire, and correction officers.
$500 million
— The total cost of Variable Supplement Fund payments made to eligible retirees in 2014.
41,603
— The number of Variable Supplement Fund recipients as of June 30, 2013.
$2.9 billion
— The amount transferred from the pension funds to the Variable Supplement Funds in fiscal year 2014.
17.5 percent
— The combined return earned by the pension system on its $150.3 billion in investments in fiscal year 2014.
$8.6 billion
— The total pension contributions required in the fiscal year 2015 budget.
Five legislative bills currently awaiting action would reverse significant 2012 pension reforms by increasing taxpayer costs and expanding benefit eligibility. Vetoing these measures is necessary to maintain fiscal responsibility and protect the savings achieved through previous pension restructuring.
Recommendations related to Pension Costs
The Governor should veto A7862/S5644, which would transfer SUNY police officers to a different retirement system, creating new state costs.
The Governor should veto A9162/S7716, which would allow certain police and firefighters to join an optional 20-year retirement plan without employee contributions.
The Governor should veto A9392/S7120, which would automatically enroll members of the Police and Fire Retirement System in a more expensive, optional 20-year plan.
The Governor should veto A8160/S5153, which would increase disability pensions for Suffolk County probation officers.
The Governor should veto A9051/S6810, which would provide new disability pensions for certain classes of ambulance personnel in Nassau County.
Key Data
$10 million
— one-time cost to the State for transferring SUNY police officers to the Police and Fire Retirement System under A7862/S5644
$1 million
— new annual obligations for the State resulting from the transfer of SUNY police officers under A7862/S5644
$218,000
— annual cost to Suffolk County for increasing disability pensions for probation officers under A8160/S5153
$1 million
— upfront cost to Suffolk County for increasing disability pensions for probation officers under A8160/S5153
$170,000
— annual cost for providing new disability pensions for certain classes of ambulance personnel in Nassau County under A9051/S6810
Widespread fraud within the Long Island Rail Road disability pension program, which cost over $1 billion in false claims, continues to pose a financial risk due to the Railroad Retirement Board's failure to implement sufficient oversight. Inadequate verification of disability claims and earnings monitoring by the federal agency threaten to inflate pension and health insurance costs for the Metropolitan Transportation Authority.
Recommendations related to Pension Costs
The Railroad Retirement Board should use better earnings data to ensure disability beneficiaries do not exceed income limits.
The Railroad Retirement Board should conduct a supervisory review of all disability claims to prevent fraudulent pension supplements.
The Railroad Retirement Board should develop a quality assurance review for the disability determination process to mitigate the risk of improper payments.
The Railroad Retirement Board should develop performance goals to improve the integrity of the disability program.
The Railroad Retirement Board should establish procedures to identify and to address potential fraud to protect the financial stability of the pension system.
Key Data
$1 billion
— Estimated total cost of false disability claims submitted by LIRR retirees.
$400 million
— Amount those found guilty of fraud have been ordered to pay in restitution and forfeiture.
96 percent
— Rate of reviewed claims from LIRR employees that were approved by the Railroad Retirement Board.
$10,500
— Annual earnings limit for disabled beneficiaries under federal law.
New York faces significant long-term financial challenges, including unfunded pension obligations and retiree health insurance liabilities totaling $66.5 billion. Addressing these liabilities by making pension funds whole would require $2.8 billion but would generate $500 million in interest savings over the next decade.
Recommendations related to Pension Costs
The state should reduce long-term liabilities by addressing unfunded pension obligations and other-post-employment-benefit (OPEB) liabilities.
The state should make the pension funds whole for the borrowed amount to address unfunded pension obligations, which would require $2.8 billion.
Key Data
$2.8 billion
— Cost to make pension funds whole for the borrowed amount.
$500 million
— Interest expense savings over the next 10 years from making pension funds whole.
$66.5 billion
— New York's estimated other-post-employment-benefit (OPEB) liability.
The 2014 legislative session saw numerous proposals for public employee pension benefit enhancements, collectively known as 'sweeteners,' which would have imposed significant fiscal burdens on state and local governments. These proposed benefit expansions, ranging from disability pension adjustments to service credit purchases, carried substantial multi-million and billion-dollar price tags that threaten long-term fiscal stability.
Key Data
$1.1 Billion
— Past service cost associated with Bill 4890, which replaces the current benefit of 1.5% of final average salary for each year of service credit in excess of 30 years with 2.0% benefit for Tier III, IV and V members.
$374 Million
— One-time cost associated with Bill 5324, which allows members of Tiers III and IV one month of additional service credit for each year of service after 10 years credit in NYSERS, NYSTRS, NYCERS, and NYCTRS.
$110 Million
— One-time cost associated with Bill 4920, which allows Tier I and II employees of NYSLERS and NYSLPFRS to include up to 30 days of unused accumulated vacation time in the calculation of their final average salaries.
$87 Million
— One-time cost associated with Bill 4879, which allows Tier II, III, IV, V and VI members of NYSLERS to retire without a benefit reduction upon completion of 35 years of service without regard to age.
$35 Million
— Annual contribution required in fiscal year 2015 for Bill 9594, which conforms Ordinary Disability Retirement and Accidental Disability Retirement benefits for New York City Tier III police members to benefits provided to Tier I and II police members.
$33.8 Million
— Annual cost associated with Bill 4924, which guarantees retired teachers an additional pension of $500 per year for each year of full-time credited service.
The 2014 legislative session saw numerous proposals for 'benefit sweeteners' that would increase pension and disability costs for New York State and local governments, with total estimated state-level costs reaching $1,699 million. These legislative efforts include significant enhancements to disability benefits and retirement formulas, such as a single bill that would increase the actuarial present value of benefits by $617.9 million.
Key Data
$1,699 million
— Total estimated state-level costs for the listed benefit sweetener bills.
$1.1 billion
— Past service cost associated with bill 4890, which increases the pension benefit formula for certain Tier III, IV, and V members.
$617.9 million
— Increase in the Actuarial Present Value of benefits for bill 9594 in fiscal year 2019.
$34.9 million
— Annual contribution required in fiscal year 2015 for bill 9594.
$116 million
— Total estimated local-level costs for the listed benefit sweetener bills.
Proposed legislation, A9594/S7326, threatens to reverse 2012 pension reforms that are projected to save the city $31 billion over 30 years. If enacted, this bill would increase city costs by $35 million in fiscal year 2015 alone, with actuarial contributions for the new benefits reaching $617.9 million by 2019.
Recommendations related to Pension Costs
The City should oppose the supporting home rule message under consideration in the City Council regarding bill A9594/S7326.
The City should oppose the bill A9594/S7326, which would reverse recent pension reforms and increase required future pension fund contributions.
The Mayor should affirm his commitment to fiscal responsibility by opposing the bill that would reverse recent pension reforms.
Key Data
$8.2 billion
— Pension costs in fiscal year 2013, which was up 235 percent from fiscal year 2004.
$31 billion
— Estimated savings for the City over 30 years resulting from the 2012 pension reforms.
$35 million
— The increase in the City's costs in fiscal year 2015 if the proposed changes to police disability benefits are enacted.
$266.4 million
— The actuarial value of contributions required by the City to fund the new benefit in fiscal year 2015.
$617.9 million
— The actuarial value of contributions required by the City to fund the new benefit in fiscal year 2019.
The 2014 legislative session saw numerous proposals to expand pension and disability benefits for public employees, which would have collectively imposed over $1.8 billion in additional costs on state and local governments. These "benefit sweetener" bills highlight the ongoing fiscal pressure of enhancing retirement packages without corresponding funding mechanisms.
Key Data
$1.1 Billion
— Past service cost for the proposal to replace the current benefit of 1.5% of final average salary with 2.0% for Tier III, IV, and V members.
$617.9 Million
— Increase in the Actuarial Present Value of benefits in fiscal year 2019 for the proposal to conform disability retirement benefits for New York City Tier III police members.
$374 Million
— One-time costs for the proposal to allow members of Tiers III and IV one month of additional service credit for each year of service after 10 years.
$1,699 Million
— Total estimated state-level costs for the various pension benefit enhancement bills introduced in 2014.
$116 Million
— Total estimated local-level costs for the various pension benefit enhancement bills introduced in 2014.
New York State's budget faces significant pressure from fixed costs like pension contributions and debt service, which are projected to grow 16 percent between fiscal years 2015 and 2018. Because these obligations are difficult to reduce in the short term, adhering to the state's 2 percent spending cap requires substantial cuts in other areas of the budget.
Key Data
16 percent
— Projected growth for school aid, Medicaid, pension contributions, and debt service from fiscal years 2015 to 2018.
The 2014 legislative session saw the introduction of numerous bills aimed at increasing public employee pension benefits, which would collectively impose significant long-term fiscal liabilities on state and local governments. These proposed 'benefit sweeteners' often lack adequate funding mechanisms, threatening the long-term financial stability of public retirement systems.
Key Data
$1,699 million
— Total estimated state cost for all pension benefit sweetener bills listed in the 2014 scorecard.
$1,100 million
— Past service cost associated with the bill allowing Tier III, IV, and V members to replace the current benefit with a 2.0% benefit for years of service in excess of 30.
$617.9 million
— Increase in the Actuarial Present Value of benefits for the bill conforming Ordinary and Accidental Disability Retirement benefits for New York City Tier III police members.
$374 million
— One-time costs for the bill allowing members of Tiers III and IV one month of additional service credit for each year of service after 10 years credit.
$116 million
— Total estimated local cost for all pension benefit sweetener bills listed in the 2014 scorecard.
New York State faces significant challenges in achieving a $2 billion surplus, as limiting annual spending growth to 2 percent requires difficult reductions across agency operations and local assistance programs. While debt service and fringe benefit costs, including pensions, are projected to rise to $15.1 billion by fiscal year 2016-17, controlling these expenditures remains difficult due to limited options for further savings.
Key Data
$13.1 billion
— Cost of debt service and fringe benefit costs for health insurance, pensions, and other benefits in fiscal year 2013-14.
$15.1 billion
— Projected cost of debt service and fringe benefit costs by fiscal year 2016-17.
24 percent
— Portion of all other spending comprised by debt service and fringe benefit costs for health insurance, pensions, and other benefits.
13.1 percent
— Portion of all other spending comprised by fringe benefit costs.
$1.2 billion
— Additional spending added by fringe benefit costs increasing at an average annual rate of 5.5 percent.
New York State's fiscal plan relies on temporary and dubious measures, including the deferral of $2.5 billion in required pension contributions, to balance the budget. The state should prioritize reforming existing tax relief programs like STAR and the Real Property Tax Credit to better target low and moderate-income households rather than creating new, costly initiatives.
Key Data
$2.5 billion
— The amount of required <b>pension contributions</b> deferred in the state budget, which has artificially and temporarily lowered fringe benefit expenses.
The proposed optional 25-year, fixed-rate pension funding plan for localities should be rejected because it threatens the long-term viability of pension funds and undermines the state's practice of timely bill payment. Instead, the state should pursue genuine mandate relief measures to assist local governments with labor costs.
Recommendations related to Pension Costs
The Legislature should reject the pension 'stabilization' plan, as its adoption could threaten the viability of the pension funds and erode New York’s historically good practice of paying pension bills on time.
Instead of adopting the pension 'stabilization' plan, the Legislature should enact real mandate relief measures that aid local governments.
The proposal to implement a "fixed rate" pension contribution plan for local governments threatens the long-term financial stability of pension funds by deferring necessary payments. Instead of adopting this unstable funding model, the state should maintain its commitment to fully funding pension obligations as they become due to protect future taxpayers.
Recommendations related to Pension Costs
The New York State Teachers’ Retirement System Board should reject the Governor's "fixed rate" pension contribution plan because it endangers the future financial viability of the pension funds.
Local governments should pay pension benefit obligations when they are due rather than relying on fixed rates that defer costs to the future.
Key Data
12 percent
— Proposed pension payment rate of payroll for members of the Employees’ Retirement System.
12.5 percent
— Proposed pension payment rate of payroll for members of the Teachers’ Retirement System.
18.5 percent
— Proposed pension payment rate of payroll for members of the Police and Fire Retirement System.
94 percent
— New York's pension system funding ratio in 2010, with assets covering this portion of liabilities.
8 percent
— The assumed rate of return for pension investments.
6.6 percent
— The ten-year earnings average for pension investments.
New York's proposal to allow local governments to pay fixed pension contribution rates threatens the long-term financial stability of public employee retirement systems. By artificially capping payments below actuarially required levels, the plan risks creating significant unfunded liabilities that future taxpayers will be forced to cover.
Recommendations related to Pension Costs
The Comptroller should reject the Governor's proposal to allow local governments to opt into a "fixed rate" pension contribution plan.
Local governments should pay pension benefit obligations when they are due rather than opting for underfunding schemes.
The State should maintain its historic practice of fully funding pension obligations on an annual basis to ensure long-term financial health.
Key Data
94%
— Assets covering liabilities in 2010, ranking New York 5th among states for its healthy funding ratio.
6.4%
— The ten-year earnings average for pension investments.
2.9%
— The five-year returns average for pension investments, which is substantially off the mark.
12%
— Proposed pension payment rate for members of the Employees’ Retirement System.
12.5%
— Proposed pension payment rate for members of the Teachers’ Retirement System.
18.5%
— Proposed pension payment rate for members of the Police and Fire Retirement System.
The New York State Assembly introduced eight bills that would increase public employee pension costs by at least $1.35 Billion, including a measure that would raise the benefit multiplier from 1.5% to 2%. These legislative actions threaten to erode the savings achieved by the recently enacted pension tier for new employees, necessitating close scrutiny of these benefit enhancements.
Key Data
$1.35 Billion
— Total cost added to State and local employers by eight bills introduced to enhance public employee and retiree pension benefits.
$1.1 Billion
— One-time cost to the State imposed by bill A4890, which increases the benefit multiplier for service rendered after 30 years.
1.5%
— Current benefit multiplier for service rendered after 30 years.
2%
— Proposed benefit multiplier for service rendered after 30 years under bill A4890.
0.2%
— Additional annual contribution required to cover members of Tiers 2, 3, and 4 under bill A4890.
New York's Tier VI pension reform legislation introduces significant changes, including increased employee contributions and a shift to a five-year final average salary calculation, to generate long-term savings. While these reforms provide necessary budget relief, concerns remain regarding the limited increase in retirement age and the continued inclusion of unlimited overtime in pension calculations for uniformed employees.
Recommendations related to Pension Costs
Increasing member contributions to a range of 3 to 6 percent depending on income will align New York’s average employee contribution requirement with national norms.
Moving from a three-year to a five-year final average salary and reducing the benefit multipliers for the years of service will produce significant long-term savings.
Further curbs on pension padding, such as reducing credit for accumulated leave time and imposing limitations on the inclusion of overtime, severance, and salary spiking, will limit pension costs.
The addition of a provision to discourage the practice of “sweetening” pension benefits by the Legislature will end the past practice of passing these costs on to local governments.
Key Data
3 to 6 percent
— The range of employee contributions required under the new pension reform legislation.
five-year
— The new final average salary period used for benefit calculations, increased from three years.
63
— The new retirement age for employees under the pension reform legislation.
Deferring pension fund contributions provides short-term budget relief but ultimately increases future costs, resulting in an additional $1 billion in interest expense for the state alone. Because this strategy is not prudent fiscal policy, most eligible jurisdictions, including New York City, have declined to participate in the comptroller's amortization plan.
Recommendations related to Pension Costs
New York State and localities should reject the comptroller's amortization plan because it is an expensive way to extend an already 'smoothed' payment plan.
Policymakers should avoid taking some short-run budget relief in exchange for far greater long-run costs, as it is not prudent fiscal policy.
Key Data
$1 billion
— total added interest expense for the state alone resulting from the comptroller's amortization plan
New York's public pension contribution rates are significantly lower than the national average, placing the financial burden of market downturns almost entirely on taxpayers. Implementing a "Tier VI" pension formula that increases employee contributions and introduces a risk-sharing mechanism would align the state with national standards and improve long-term fiscal sustainability.
Recommendations related to Pension Costs
Raise pension contributions by new employees to between 4 percent and 6 percent of wages, depending on pay level.
Implement a "risk-reward" approach to share the downside risk and the upside potential with employees.
If the employer-contribution rate as a share of payroll rises above 7 percent, then half of the added amount should be contributed by employees.
If employer contributions fall below 4 percent of payroll, then half of the saved amount should be used to lower employee contributions.
Key Data
22 percent
— In 2009, only 22 percent of state and local pension plans required employee contributions of less than 3.9 percent of wages.
55 percent
— In 2009, employee contributions of 6 percent or more were required in 55 percent of US public plans.
89 percent
— New York state and participating local governments paid 89 percent of pension costs, while employees paid 11 percent.
87 percent
— In 2009, 87 percent of the amount paid to New York’s local plans came from taxpayers, and just 13 percent came from employees.
66 percent
— In 2010, employers in US state-run public-pension funds paid on average 66 percent of the total, while employees paid 33 percent.
New York's public pension systems rely heavily on taxpayer funding, with an employer-to-employee contribution ratio significantly higher than the national average. Implementing the proposed Tier VI reforms, which include increasing employee contribution rates to between 4 and 6 percent and establishing a risk-sharing mechanism, would align the state more closely with national norms and reduce the burden on taxpayers.
Recommendations related to Pension Costs
The state should adopt the Tier VI proposal to increase employee contributions to a range of 4 percent to 6 percent of wages, bringing New York in line with national public sector norms.
Policymakers should implement the 'risk-reward' approach included in the Governor’s proposal, which shares the downside risk and upside potential of market performance between employers and employees.
New York should increase the employee contribution rate for public pensions to move toward the middle of the pack among states and provide relief to local government leaders and taxpayers.
Key Data
78 percent
— In 2009, this share of state and local pension plans required employee contributions greater than 3.9 percent.
89 percent
— This was the share of total contributions made by New York State and its local government entities to state-run systems in 2010, compared to an 11 percent share from employees.
8:1
— This represents the employer-to-employee contribution ratio for New York's state-run pension systems, which is significantly higher than the national average of 2:1.
7:1
— This is New York's ratio of employer to employee contributions for local pension systems, compared to a national average of 4:1.
$7.2 billion
— This amount, representing 87 percent of total contributions to New York's local pension plans in 2009, was paid by local taxpayers.
Transit employees receive defined-benefit pensions that are more generous than those offered to new state and city employees, as well as most private sector workers. To maintain fiscal stability and avoid fare hikes, any new labor agreement should align with the state's pattern of wage freezes and increased employee contributions toward benefits, including pensions.
Recommendations related to Pension Costs
The arbitration panel should consider the inclusion of TWU employees in the 'Tier VI' proposal, which would increase the vesting period, retirement age, and mandatory contributions while changing overtime pay to non-pensionable status.
The MTA should pursue reforms that change overtime pay to non-pensionable status to bring New York closer to nationwide norms.
Key Data
20%
— Percentage of private sector employees who have access to a defined benefit pension plan.
3%
— Annual salary contribution TWU members make toward the cost of their pensions.
50%
— Percentage of final average salary received by employees with 25 years of service who retire at age 55 under the most common retirement plan.
$15,000
— Limit on pensionable overtime pay for new State civilian employees.
Governor Cuomo’s proposed "Tier VI" pension reform introduces an optional 401(k)-style defined contribution plan for new public employees to improve long-term affordability and sustainability. This approach mirrors trends in the private sector, where participation in traditional defined benefit plans has dropped significantly, and offers a more portable retirement option for a modern workforce.
Key Data
76% to 24%
— The share of full-time workers in private industry participating in defined benefit pension plans declined between 1986 and 2008.
58%
— The percentage of private sector employees who had access to defined contribution plans in 2011.
30%
— The percentage of state and local government employees who had access to a defined contribution plan in 2011.
4%
— The proposed employer contribution rate of an employee’s salary to a 401(k)-style plan under the Tier VI proposal.
7%
— The maximum employer contribution rate, including matching, under the proposed Tier VI 401(k)-style plan.
New York's pension system relies heavily on state funding, with employee contributions accounting for only 11.5% of combined contributions, significantly lower than the 33% U.S. average. To address this disparity, the Governor has proposed a modernization plan that increases employee contributions to between 3% and 6% of salary and introduces a risk/reward mechanism to adjust contributions based on investment performance.
Recommendations related to Pension Costs
The Governor's proposal to modernize the system would increase the contributions required of public employees, who would be required to contribute between 3% to 6%, rising according to salary, toward the cost of their pensions.
The proposal includes a “risk/reward” provision that would reduce employee contributions if investment earnings are flush and increase the required contributions if the level of contribution required by employers exceeds a certain rate.
Key Data
11.5%
— Employee contributions as a share of combined employee and employer contributions to New York State’s pension systems.
33%
— U.S. average for employee contributions as a share of combined employee and employer contributions.
1%
— Public employee contributions as a share of total revenues to New York State’s pension systems in 2010.
8.5%
— U.S. average for public employee contributions as a share of total revenues to pension systems.
47th
— New York’s ranking among states for public employee contributions as a share of total revenues.
New York's public employee pension costs are among the highest in the nation, with projections indicating that New York City's pension expenses will reach $8.6 billion by 2014. Proposed reforms, including a 401(k)-style option and increased employee contributions, aim to save taxpayers $123 billion over 30 years while ensuring the long-term sustainability of retirement benefits.
Recommendations related to Pension Costs
The state should implement a new pension arrangement for future state and local government employees that includes a 401(k)-style option.
Future employees who opt for the traditional defined benefit plan should be required to contribute between 3% and 6% of their paychecks toward their pensions.
The state should raise the retirement age from 62 to 65 for future employees to align with national trends.
The state should bar overtime from pension calculations for future employees, consistent with the practice for the vast majority of public employees in the country.
New employees should be given the opportunity to enroll in a 401(k)-style plan where they can have up to 10% of their salary deposited in a retirement account if they opt for the full matching program.
Key Data
$574
— New Yorkers pay this amount per person per year in taxes for public employee pensions, which is more than twice the national average.
$8.6 billion
— New York City’s pension costs are expected to reach this amount by FY 2014.
$123 billion
— The proposed changes would save taxpayers throughout New York State this estimated amount over the next 30 years.
14%
— This is the average annual growth rate of New York City's pension costs between FY 2004 and FY 2014.
30%
— Without reform, pension costs will total this percentage of the MTA payroll by FY 2014.
19%
— Without reform, pension costs will total this percentage of fare and toll revenue for MTA subways, buses, bridges, and tunnels by FY 2014.
New York faces rapidly escalating pension costs, with New York City's expenses projected to reach $8.6 billion by fiscal year 2014 and MTA costs expected to hit $1 billion. Implementing a new pension benefit package for new employees could save state and local governments $123 billion over 30 years, bringing the state closer to national norms.
Recommendations related to Pension Costs
The governor should use his influence in the budget process to bring about more affordable pension benefits at all levels of government.
A pension reform proposal should be included in the governor's budget, and the Legislature should swiftly adopt it.
Implementing a new package of pension benefits for new employees would bring New York in line with national norms, saving New York state and local governments $123 billion over the next 30 years.
Key Data
$8.6 billion
— New York City's projected pension costs by FY 2014, up from $2.4 billion in FY 2004.
$1 billion
— MTA pension costs projected for FY 2014, rising from $314 million in FY 2004.
$2 billion
— State government pension costs expected by FY 2014, up from $455 million in FY 2004.
$123 billion
— Projected savings for New York state and local governments over 30 years from a new package of pension benefits for new employees.
$574
— Annual tax amount paid per person in New York for public employee pensions, which is more than twice the national average.
$12
— Pension cost per $1,000 of personal income in New York, which is more than 70% above the national average.
New York's public employee pension costs have risen dramatically, placing a significant financial burden on the state, New York City, and the Metropolitan Transportation Authority. Implementing the proposed "Tier VI" pension reform, which includes higher employee contributions and a higher retirement age, is necessary to align benefits with national norms and ensure long-term fiscal sustainability.
Recommendations related to Pension Costs
The New York State Legislature should adopt the "Tier VI" pension reform plan in a timely manner to address rising costs.
Governor Andrew Cuomo should include the "Tier VI" pension reform plan in the upcoming Executive Budget.
The state should consider extending optional defined contribution plans to other groups of employees to provide more portable retirement benefits.
Key Data
$123 billion
— The total projected savings from the proposed **Tier VI pension reforms** for New York State, local governments, and New York City over 30 years.
$8.6 billion
— The projected amount of **New York City pension payments** in fiscal year 2013.
$574
— The combined state and local **pension cost per capita** in New York, which is more than twice the national average.
$2.0 billion
— The State's required **pension payment** projected for fiscal year 2014.
$30 billion
— The estimated savings for **New York City pension systems** over 30 years under the proposed reforms.
$12
— The amount of **pension costs per $1,000 of personal income** in New York, which is more than 70 percent above the national average.
The Office of the New York City Actuary is expected to lower the Actuarial Interest Rate from 8 percent to between 7.0 and 7.5 percent, a move that would increase annual pension costs by $750 million to $1.4 billion. While costly, this adjustment is necessary to ensure pension funds remain fully funded and aligns the city with the practices of other large public pension systems.
Recommendations related to Pension Costs
The City should reduce the Actuarial Interest Rate to ensure City’s pension funds remain fully funded.
The City should align its pension assumptions with changes adopted by other large public pension systems.
Key Data
$750 million to $1.4 billion
— Estimated increase in the City’s annual pension costs if the Actuarial Interest Rate is reduced.
8 percent to 7.5 percent or 7.0 percent
— Expected reduction range for the Actuarial Interest Rate (AIR) used to calculate pension costs.
15 percent to 30 percent
— The share of public pension funds with an AIR below 8 percent doubled between 2001 and 2009.
85 percent
— Percentage of all U.S. state and local government pension assets and membership represented by the 126 public pension funds in the database.
The 2010 Early Retirement Incentive in New York saved a net $681 million over two years by reducing payroll costs, though this was offset by $755 million in increased pension benefit obligations. While the program achieved short-term savings, alternative reforms to fringe benefits, such as adjusting health insurance premium sharing, could have yielded greater financial benefits without requiring significant workforce reductions.
Recommendations related to Pension Costs
School districts outside New York City should align their health insurance premium sharing plan with New York State government to achieve significant savings.
The state should eliminate the practice of reimbursing Medicare Part B premiums to reduce government expenditures.
Government employers should increase health insurance premium sharing for retirees to 50 percent to generate substantial savings.
Policymakers should explore a broader range of options when considering future labor savings beyond early retirement incentives.
Key Data
$681 million
— The combined net savings from the Early Retirement Incentive over two years.
$755 million
— The total cost of increased pension benefit contributions resulting from the incentive.
$1.4 billion
— The gross savings generated from two-year payroll reductions.
$817 million
— The total savings that would have been achieved over two years if the same headcount reduction had been accomplished through layoffs.
9,311
— The number of experienced workers lost due to the early retirement incentive.
The proposed legislation A6309/S4067, which would allow school districts to borrow funds to cover pension contributions, should be vetoed because it undermines the property tax cap and shifts financial burdens onto future students and taxpayers. Employer contributions to the New York State Teachers’ Retirement System surged from $211 million in 2000 to over $925 million in 2010, highlighting the need for sustainable pension benefit reforms rather than borrowing.
Recommendations related to Pension Costs
The Governor should veto A6309/S4067 to avoid undermining the discipline imposed by the property tax cap.
The state should implement real and lasting changes to pension benefits to ensure long-term sustainability rather than allowing school districts to borrow.
Policymakers should reject legislation that allows school districts to borrow to cover pension costs, as this pushes costs onto future taxpayers and students.
The state should prioritize the enactment of a new pension tier to make pension costs a high priority for taxpayers and officials.
Pension raiding should be prohibited to prevent the proliferation of borrowing schemes that threaten fiscal health.
Key Data
$211 million
— Employer contributions to the New York State Teachers’ Retirement System in 2000.
$925 million
— Employer contributions to the New York State Teachers’ Retirement System in 2010.
16 percent
— Average annual growth rate of employer contributions to the New York State Teachers’ Retirement System between 2000 and 2010.
125 percent
— Amount of 2011 pension contributions school districts would be allowed to borrow under the proposed legislation.
15 years
— Repayment period for the proposed school district pension borrowing.
The proposed legislation allowing school districts to borrow funds to cover pension contributions should be vetoed because it undermines the property tax cap and shifts financial burdens onto future taxpayers and students. Instead of delaying these costs, the state should implement structural changes to pension benefits to ensure long-term sustainability.
Recommendations related to Pension Costs
The Governor should veto A6309/S4067 to prevent school districts from borrowing to cover pension contributions.
The state should implement real and lasting changes to pension benefits to ensure they are sustainable over the long run.
Key Data
$211 million
— Employer contributions to the New York State Teachers’ Retirement System in 2000.
$925 million
— Employer contributions to the New York State Teachers’ Retirement System in 2010.
16 percent
— Average annual growth rate of employer contributions to the New York State Teachers’ Retirement System between 2000 and 2010.
125 percent
— Amount of 2011 pension contributions that school districts would be allowed to borrow under the proposed legislation.
New York City's fiscal health is threatened by the unchecked growth of health insurance, pension contributions, and debt service, which are projected to consume 33% of total revenues by 2015. To address these structural deficits and avoid future service cuts, the City must enact pension reforms that increase the retirement age and employee contributions, potentially saving $30 billion over 30 years.
Recommendations related to Pension Costs
The City Council should join the Mayor in backing the pension reform bill that has been introduced by the Governor.
The City should implement pension reforms that increase vesting to 12 years, raise the retirement age to 65, require greater contributions from employees, and eliminate overtime from the final salary calculation.
City leaders should work together to restrain the growth of pension contributions alongside other fast-growing expenses to avoid future budget gaps.
Key Data
$11 billion
— Total spending on health insurance, pension contributions, and debt service in 2005.
$23.1 billion
— Projected total spending on health insurance, pension contributions, and debt service in 2015.
$30 billion
— Total savings over the next 30 years from the proposed pension reform bill.
22%
— Share of total revenues claimed by health insurance, pension contributions, and debt service in 2005.
33%
— Projected share of total revenues claimed by health insurance, pension contributions, and debt service in 2015.
Legislation allowing school districts to borrow funds to cover required pension contributions would harm long-term fiscal stability by shifting current costs onto future taxpayers. Such borrowing practices obscure the actual expenses of retiree benefits and hinder meaningful efforts toward comprehensive pension reform.
Recommendations related to Pension Costs
School districts should not finance a portion of their required pension contributions by borrowing and paying it back over 15 years, as this practice would damage the long-term fiscal health of participating school districts.
Policymakers should avoid masking the true cost of retiree benefits, as this practice impedes any serious effort toward pension reform.
Legislators should reject legislation that pushes the cost of current services to future years and taxpayers, as this contradicts and undermines the purpose of the property tax cap.
New York City's pension costs have quadrupled since 2002, squeezing budgets for other essential services and necessitating structural reforms to future benefits. Governor Cuomo's proposal aims to create a more sustainable system by increasing the retirement age, raising employee contributions, and eliminating pension padding, which would save $93 billion for state and local governments over 30 years.
Recommendations related to Pension Costs
The state should increase the retirement age to 65 for future employees to align with Medicare eligibility.
Legislators should raise required employee contributions to 6 percent for their entire length of service to bring them closer to national norms.
The state should eliminate 'pension padding' by calculating benefits based on the highest five years of earnings and excluding overtime pay.
Legislative and union leaders should support the structural changes proposed by Governor Cuomo to ensure the long-term solvency of the pension system.
Municipal union leaders and their members should support these changes to the pension system to protect vital services from drastic layoffs.
Key Data
$1.5 billion to $7 billion
— The growth of New York City pension costs since 2002.
$8.7 billion
— The projected cost of New York City pensions in 2015.
$93 billion
— The projected 30-year savings for state and local governments from the proposed pension reforms.
$30 billion
— The projected 30-year savings for New York City from the proposed pension reforms.
3 percent
— The current contribution rate for many New York state, city, and local employees.
6.4 percent
— The nationwide mean contribution rate for state and local workers with a fixed contribution requirement.
The 2011 scorecard identifies numerous proposed legislative bills that would increase public employee pension benefits, collectively imposing significant financial burdens on state and local governments. These "sweeteners" include changes to salary formulas, retirement age adjustments, and service credit expansions that carry multi-million dollar price tags for taxpayers.
Key Data
$130.0 Million
— Estimated local cost for bill A5093, which changes how the final average salary is determined for Tiers II, III, & IV state and local employees.
$99.3 Million
— Estimated local cost for bill A6848, which allows state and local teachers to receive one additional day of service credit for each unused sick day up to 90 days.
$97.0 Million
— Estimated local cost for bill A3904, which permits retirement at any age over 55 for those between 25 and 30 years of service without a reduction in the benefit accrual rate.
$95.0 Million
— Estimated state cost for bill A5093, which changes how the final average salary is determined for Tiers II, III, & IV state and local employees.
$86.0 Million
— Estimated local cost for bill A5086, which changes the benefit multiplier for Tier III, IV, & V state and local employees back to the Tier I multiplier.
$70.0 Million
— Estimated state cost for bill A3904, which permits retirement at any age over 55 for those between 25 and 30 years of service without a reduction in the benefit accrual rate.
New York faces a significant fiscal challenge as the cost of public employee retirement benefits has surged, with annual state pension contributions rising from $100 million to nearly $1.5 billion over the last decade. This financial strain is exacerbated by generous benefit structures, including the inclusion of overtime in salary calculations and substantial unfunded liabilities for retiree health insurance that total $56 billion for the state.
Key Data
$1.5 billion
— Current annual pension contributions for New York state.
$56 billion
— Unfunded liability for retiree health benefits for the state.
$61,295
— Average pension received by police and firefighters who retired in 2009.
$25,440
— Average pension received by regular civilian employees who retired in 2009.
$9 billion
— Projected budget deficit for New York state for the next year.
515,000
— Number of retirees and beneficiaries in the state pension system.
Rising pension costs for city workers are forcing significant budget cuts to essential youth services and agency staffing. To address the ongoing recession, the state should implement a new pension system for future uniformed workers and increase cost-sharing for health insurance premiums.
Recommendations related to Pension Costs
The Legislature must enact a new pension system for future uniformed workers that includes a minimum age for retirement.
Future uniformed workers should have their pension based on salaries without overtime.
Future uniformed workers should be obliged to contribute more to their pensions during their working years.
Union leaders must agree to more cost-sharing for health insurance premiums.
Retirees should be paying for a share of their benefits similar to arrangements in the private and nonprofit sectors.
Key Data
$6.6 billion
— Total pension contributions cost New York's taxpayers last year.
$69,884
— Annual city-funded pension fund contribution for each firefighter.
$51,829
— Annual city-funded pension fund contribution for each police officer.
$1.2 billion
— Retiree health insurance cost New York taxpayers last year.
$4.9 billion
— Annual pension fund contributions in 2007.
$8.1 billion
— Projected annual pension fund contributions in fiscal year 2012.
New York State's public pension systems face rising costs, with employer contributions reaching $1.5 billion annually and projected to exceed $2 billion by 2014, driven by factors like the inclusion of overtime in benefit calculations and generous retiree health benefits. These retirement obligations, including a $56 billion liability for retiree health insurance, highlight the need for reforms to ensure the system remains fair and sustainable.
Recommendations related to Pension Costs
The State should pursue changes to prevent underfunding of the pension systems and make retirement benefits more fair and affordable.
Policymakers should implement caps on overtime included in final average salary calculations to discourage pension padding.
The State should reform retiree health benefits to require employee contributions on a sliding scale based on length of service.
The State should expand the availability of defined contribution plans as an alternative to traditional defined benefit plans.
Key Data
$56 billion
— Future cost of New York State retiree health insurance obligations.
$1.5 billion
— Annual pension contributions cost for the State.
$33,270
— Average annual pension for employees retiring in 2010.
515,100
— Total number of retirees and beneficiaries in the state pension systems.
Proposed legislation mandating 80 hours of additional training for firefighters would increase pension costs by including overtime in final salary calculations, exacerbating an already rapidly growing budget item. With pension costs projected to grow nearly 20 percent to over $8 billion by 2014, the City should avoid mandates that unnecessarily inflate these long-term obligations.
Recommendations related to Pension Costs
Governor Paterson should veto A9885/S6784, as the legislation generates higher future pension costs by including additional overtime in the final year's salary on which pensions are based.
The City should not be mandated to create further increases in pension costs due to non-essential training, given that these costs are already one of the fastest growing items in the City's budget.
Key Data
$29.5 million
— Estimated cost of the legislation that would increase pension obligations.
$19 million
— Increase in current year wages and fringe benefits resulting from the training mandate.
20 percent
— Projected growth of pension costs in the City's budget.
The Governor is urged to veto legislation that would increase pension costs for state and local employees, as these benefit enhancements would add financial strain to an already unaffordable system. These proposed bills would expand retirement benefits, including salary calculation adjustments and plan switches, despite the need for greater fiscal responsibility.
Recommendations related to Pension Costs
The Governor should veto the bills enhancing benefits for State and local employees and retirees that the Legislature has advanced.
The Governor should veto the bill A8664-A/S5748A, which would make the final average salary calculation for New York City teachers who have taken a leave of absence more generous.
The Governor should veto the bill A8509A/S5633A, which enhances pension packages for uniformed employees by allowing members of the State Department of Corrections to defer five vacation days per year.
The Governor should veto the bill A10068/S7078, which allows certain employees in nursing titles to switch from a defined contribution to a defined benefit plan.
The Governor should veto the bill A10753/S7544, which would set a precedent for State police officers to receive death benefits for longer periods of service.
The Governor should continue to stand for fiscal responsibility by rejecting these and any other bills that add costs to an already unaffordable pension system.
Key Data
25
— Number of bills tracked on the annual Sweetener Scorecard that enhance benefits for State and local employees and retirees.
$1.1 million
— Annual cost in added contributions for the bill A8664-A/S5748A regarding New York City teachers' final average salary calculation.
five
— Number of vacation days per year that members of the State Department of Corrections would be allowed to defer and receive as a lump sum payment upon retirement under bill A8509A/S5633A.
New York's proposal to defer pension contributions to address short-term budget gaps creates significant long-term financial liabilities, with repayment costs estimated at $5.8 billion. Simultaneously, the state continues to enhance public employee benefits, further exacerbating future fiscal pressures instead of pursuing permanent, long-term savings.
Recommendations related to Pension Costs
The state should avoid the "stretch" proposal to defer pension contributions, as it creates a slippery slope of hidden debt.
Efforts to please the labor unions with sweeteners should be foresworn.
More aggressive plans to provide permanent, long run savings should be developed.
Key Data
$50 billion
— Amount that California and Illinois each owe their employees' pension funds.
85 percent
— Increase in required taxpayer support for New York State employee pensions from fiscal year 2010-11 to 2013-14.
$4.5 billion
— Estimated cumulative reductions in pension fund contributions over the six-year period of the stretch proposal.
$5.8 billion
— Estimated cost to repay the loan created by the deferred pension contributions.
$1.5 billion
— Amount in fewer total assets the State pension funds will have by fiscal year 2025-26 under the amortization plan.
New York City and State retirement benefits are significantly more generous than those offered by other large public and private employers, contributing to rapidly growing fiscal burdens. To address these costs, the current defined benefit pension systems should be converted to defined contribution plans, and existing benefits should be reformed to align more closely with standard practices.
Recommendations related to Pension Costs
The New York systems should require a higher percentage contribution, and not limit it to ten years.
The New York system should adopt similar age thresholds to the federal Social Security system, perhaps with a lower minimum (but some minimum) for police officers and firefighters.
The FAS should be based on five years’ experience and should take into account only base salary, excluding overtime and other supplements subject to manipulation.
The current provisions for work-related disabilities should be revised to set more rigorous standards.
The variable supplements available to some retired New York City uniformed workers contradict the principle that pension payments should be a regular and predictable source of income for retirees.
The long-run goal of pension reform should be to convert from defined benefit to defined contribution plans.
Key Data
$4.7 billion
— Projected required contributions to New York City pension funds in fiscal year 2008.
$1.4 billion
— Projected required pension fund contributions from New York State in 2008.
$12,000
— The amount of the annual variable supplement or 'Christmas bonus' for some retired New York City uniformed workers by 2007.
43 percent
— Percentage of retired firefighters receiving additional benefits due to a disability deemed to be job related.
28 percent
— Percentage of retired police officers receiving additional benefits due to a disability deemed to be job related.
3 percent
— The most common employee contribution requirement for pension plans, typically limited to ten years.
City pension contributions rose from $3.9 billion in 2006 to $6.3 billion in 2009, with projections exceeding $7.9 billion by 2014, necessitating reforms to future benefits. Additionally, the city faces a $65 billion liability for retiree health insurance premiums and has inappropriately diverted $1.2 billion from the Retiree Health Benefits Trust to balance operating budgets.
Recommendations related to Pension Costs
The only way to avoid an unaffordable burden in coming years' budgets is to make pension benefits less lavish.
The state constitution guarantees current retirees and workers their pension benefits, but those benefits can and should be reduced for future workers.
Taxpayers should join the mayor in a campaign to enact pension reform in the current legislative session, with savings from Tier 5 beginning on July 1.
The imprudent diversion of funds from the Retiree Health Benefits Trust should be eliminated from the Executive Budget.
The city should also require retirees to pay a substantial share of their health insurance premiums; unlike pensions, this benefit is not protected by the state constitution.
Key Data
$3.9 billion
— City pension contributions in fiscal year 2006.
$6.3 billion
— City pension contributions in fiscal year 2009.
$7.9 billion
— Projected city pension contributions in fiscal year 2014.
$65 billion
— Actuarial value of future health insurance premiums for retirees and their dependents.
$1.2 billion
— Amount from the Retiree Health Benefits Trust used to balance the budget in fiscal years 2011 to 2013.
$1.1 billion
— Additional tax revenue expected in each fiscal year from 2011 to 2013.
New York faces a significant budget gap that requires ending entitlements for those who do not need them to avoid tax increases. State employee benefits are projected to rise significantly, with pension costs expected to increase by 132 percent over three years.
Recommendations related to Pension Costs
To close the budget gap without raising New York’s already high taxes, entitlements must end for those who do not need them.
Key Data
132 percent
— Projected increase in pension costs over three years.
60 percent
— Amount state employee benefits will add on top of salaries by 2014.
10 years
— Number of years of service required for state employees to retire and receive lifetime health care.
New York State's long-term debt burden, which includes significant unfunded pension and retiree health benefit liabilities, places it in a "danger zone" compared to other states. To exit this status, the state would need to reduce its long-term liabilities by $20.4 billion from its 2008 level of $120.0 billion.
Recommendations related to Pension Costs
State and local governments should add unfunded pension obligations and unfunded obligations for other post-employment benefits (OPEB) to the state's bonded debt when considering the ability of an entity to repay its debt.
To fall below the danger zone threshold, New York would have to lower its long-term liabilities from the 2008 level of $120.0 billion by $20.4 billion.
If the reduction in long-term liabilities were achieved entirely through long-term bonds, then that debt would have to be lowered from $71.9 billion to $51.5 billion.
Key Data
$120.0 billion
— The 2008 level of New York's long-term liabilities.
$20.4 billion
— The amount by which New York would need to lower its long-term liabilities to fall below the danger zone threshold.
$50.8 billion
— New York's unfunded OPEB liability, which ranks second highest in the nation behind only California.
$48.1 billion
— The combined unfunded pension and OPEB liability in New York, which ranks third highest behind California and New Jersey.
$71.9 billion
— New York's long-term bond debt in 2008.
Retired police and firefighters receive annual "Christmas bonuses" through Variable Supplement Funds (VSF), which are separate from regular pension checks and cost the city $405 million in fiscal year 2010. Because these payments are not constitutionally protected like standard pension benefits, the State Legislature has the authority to reduce or eliminate them to mitigate the financial burden on the city.
Key Data
$405 million
— Total VSF benefits paid to retirees in fiscal year 2010.
$164 million
— Total VSF benefits paid to retirees in fiscal year 2001.
$12,000
— Annual Christmas bonus payment received by eligible retired police and firefighters.
$1.7 billion
— Total assets held in the Variable Supplement Funds in fiscal year 2010.
The 2010-11 New York State budget proposal addresses a $6.7 billion deficit through a combination of spending controls, revenue initiatives, and $262 million in pension cost deferrals. The plan prioritizes structural balance by avoiding reliance on nonrecurring measures and assuming no additional federal stimulus aid.
Key Data
$262 million
— Amount of pension cost deferrals proposed to help fill the 2010-11 fiscal year budget hole.
New York City's public sector benefits, including pension and health insurance, are significantly more generous than those offered by private firms, creating a substantial financial burden on taxpayers. Aligning these benefits with private sector standards, such as transitioning to defined contribution pension plans for future hires, could yield significant long-term savings.
Recommendations related to Pension Costs
The City could be competitive with the private sector by converting to defined contribution plans for its workers.
New pension policies should be applicable only to future hires because the State Constitution prohibits changes in benefits for current workers.
Reforms in pension and health benefits are essential to balance their cost to taxpayers and their value in helping to recruit and retain a competitive workforce.
Key Data
$6.7 billion
— Annual contributions to pension funds on behalf of current workers.
$10.4 billion
— Total annual cost to New York City taxpayers for pension and health insurance benefits.
90 percent
— Share of the 52 surveyed private firms that offered a defined contribution pension plan.
52
— Number of major private firms that participated in the benefits survey.
100,000
— Total number of employees in New York City represented by the surveyed private firms.
New York State recently established a new, less costly tier of pension benefits for government employees to address rapidly rising costs, marking the first such adjustment in nearly three decades. However, the state also enacted a provision that restricts local school districts from modifying retiree health insurance benefits without union bargaining, potentially limiting future cost-containment efforts.
Recommendations related to Pension Costs
The Legislature must stick to the terms of the new pension tier and refrain from the past practice of passing various 'sweetener' bills that raise costs.
The Governor and all future Governors will need to stand firm against demands from other employee groups for permanent retiree health insurance protections.
Key Data
30 years
— The amount of time that had passed since pension benefits were last adjusted to meet fiscal realities before the new tier was created.
Public employee pension costs in New York State are rising rapidly, with public employers projected to increase their annual contributions by 60 percent starting in 2011. To address the funding crisis, the state should maintain full funding requirements, limit benefit enhancements, and create a more affordable pension tier rather than borrowing against future funds.
Recommendations related to Pension Costs
New York’s full funding requirements should not be changed.
The Legislature must curb the tendency to enrich benefits.
The Legislature must immediately enact a new, less costly pension tier.
Key Data
60 percent
— Projected increase in annual contributions public employers in New York State will have to make to fully meet their pension obligations starting in 2011.
New York's government pension costs are rising rapidly, with employer contributions growing from $292 million in 1999 to $2.6 billion, while benefit payments reached $5.6 billion in 2008. To address the fiscal strain caused by permanent pension sweeteners, policymakers should halt new benefit enhancements and establish a new, more affordable pension tier for future workers.
Recommendations related to Pension Costs
Legislators should refrain from introducing or supporting any pension sweetener legislation during the remainder of the session.
Legislators should support the legislation endorsed by Governor David Paterson and New York City Mayor Michael Bloomberg that would create a new pension tier for future workers.
Key Data
$292 million
— Required employer contributions to pension funds in 1999.
$2.6 billion
— Required employer contributions to pension funds as of 2009.
$5.6 billion
— Total pension benefit payments in 2008.
78 percent
— Amount by which New York's local tax burden exceeds the U.S. average in dollars per $1,000 in personal income.
35 percent
— Amount by which New York's combined state and local tax burden exceeds the U.S. average.
9 to 1
— Ratio of employer to employee contributions in New York’s State and Local Retirement Systems.
New York State's uniformed employees receive significantly more generous pension benefits than civilian counterparts, with public employers contributing 20 percent of salary for uniformed staff compared to 11 percent for civilians. To control rising pension costs, new police and fire hires should be included in Tier V benefits rather than being granted extensions of more expensive Tier II provisions.
Recommendations related to Pension Costs
The Governor should veto A3426/S1409, which would extend Tier II provisions to new police officers and firefighters.
To effectively curb rising state and local pension costs, new uniformed employees must be eligible for Tier V benefits along with civilian employees.
Any effort to exempt uniformed employees from Tier V benefits, even on a temporary basis, should be rejected.
The Governor should resist any effort to exempt certain classes of employees from the provisions of Tier V.
Key Data
86 percent
— of the uniformed employees that retired from the New York State Police and Fire Retirement System were under the age of 60.
$48,900 to $66,586
— is the range of annual lifetime pension payments for uniformed employees who retired last year.
20 percent
— of salary is the required contribution rate for public employers to fund the pension of a uniformed employee.
11 percent
— of salary is the required contribution rate for public employers to fund the pension of a civilian employee.
New York City faces a significant financial challenge regarding the rapid growth of retirement benefits for its employees. This analysis examines the factors contributing to these escalating pension obligations and their impact on the city's fiscal health.
New York City's retirement benefit costs have surged, with annual pension funding growing by $4 billion since 2003 and total annual benefit payouts exceeding $10.2 billion. To address this fiscal pressure, the city must implement a new, less costly pension tier for future workers, require retiree contributions to health premiums, and eliminate generous supplemental 'Christmas bonuses' for police and firefighters.
Recommendations related to Pension Costs
The city should enact legislative changes to create a new 'tier' for future workers that would provide less costly benefits.
The city should apply the concept of employee contributions to health premiums to retirees.
The city should work to lower or end the police and firefighter 'Christmas bonuses', which are unusually generous but not protected by the state Constitution.
Key Data
$4 billion
— The amount by which the annual cost of funding pensions has grown since fiscal year 2003.
$5.7 billion
— City pension-fund contributions in fiscal year 2008.
$7.6 billion
— Projected city pension-fund contributions by fiscal year 2013.
$10.2 billion
— The amount paid in benefits to New York City's retirees annually.
$1.1 billion
— The amount the city spent on health care for retirees in fiscal year 2008.
$1.9 billion
— Projected city spending on health care for retirees in fiscal year 2013.
New York's public employee benefit packages, including pension systems that allow overtime to be counted as pensionable salary, are significantly more generous than those in the private sector and other states. To address fiscal challenges, the state should implement reforms such as creating a new pension tier that increases retirement ages and employee contributions while reducing final salary calculations.
Recommendations related to Pension Costs
The Legislature should support the creation of a Tier V in the pension system to increase the retirement age, increase employee contributions, and scale back final salary calculations.
Key Data
94%
— Percentage of public pension systems that require greater employee contributions than New York.
1 to 3%
— New York's average employee contribution rate to public pension systems.
New York State faces significant fiscal pressure from employee compensation, which accounts for nearly one-fifth of the state budget and over half of the New York City budget. To address these costs, proposals include increasing the retirement age from 55 to 62, eliminating overtime pay from pension calculations, and extending mandatory employee contributions beyond 10 years of service.
Recommendations related to Pension Costs
The state should eliminate one annual pay increase, typically averaging 3 percent, for state employees that was planned as part of recent collective bargaining agreements.
The state should require retired state employees to pay a larger share of their health insurance premiums.
The state should eliminate the inclusion of overtime pay in calculating the worker's salary base for pension benefits.
The state should increase the minimum age requirement for most workers from 55 to 62.
The state should extend the employees' mandatory contribution beyond the first 10 years of service.
Key Data
$25 million to $500 million
— Projected annual savings for New York City if pension plans for new hires were changed.
$250 million
— Short-term savings in fiscal year 2010-11 from the proposed measures.
3 percent
— Average annual pay increase for state employees that the state proposes eliminating.
55 to 62
— Proposed increase in the minimum age requirement for most workers to receive pension benefits.
10 years
— Current duration of mandatory employee contributions that the state proposes extending.
New York City's pension system for municipal workers is significantly more generous than private sector equivalents, with taxpayers contributing $4 billion annually to pension funds and an additional $900 million for retiree health insurance. To address these spiraling costs, the city should consider reforms such as adjusting the benefit formula to exclude overtime and raising the retirement age for new hires.
Recommendations related to Pension Costs
New York should trim the pension benefits of newly hired city workers to address spiraling costs.
The city should exclude overtime earnings from the benefit formula, as this is a practice rare in other systems.
The city should raise the retirement age for employees, as the current eligibility age of 55 is well below the age for full Social Security benefits.
Key Data
$4 billion
— Annual taxpayer contribution to the pension funds of municipal workers.
$900 million
— Annual taxpayer contribution for retiree health insurance.
$5.7 billion
— Projected pension contributions in 2010.
15%
— Average hourly wage advantage for public employees over private firms.
30%
— Wage advantage for public-sector blue collar workers over private-sector counterparts.
55
— Age at which most New York City employees are currently eligible to retire.
New York City's pension contributions are the fastest-growing component of non-discretionary spending, with an average annual growth rate of 9.4 percent. Establishing a more affordable pension plan for new workers could generate $549 million in savings by fiscal year 2009.
Recommendations related to Pension Costs
A new and more affordable pension plan could be established for new workers through State legislation.
If employer contributions under the new plan were held to 10 percent of payroll, it would save the City $549 million by fiscal year 2009.
Key Data
$549 million
— Projected savings by fiscal year 2009 if employer contributions under a new pension plan were held to 10 percent of payroll.
9.4%
— Average annual growth rate of pension contributions between 2005 and 2009.
$3,211 million
— Pension contributions in 2005.
$4,600 million
— Projected pension contributions in 2009.
22%
— Percentage of the workforce expected to be under the new pension plan by fiscal year 2009.
New York City and State pension costs have grown rapidly, with required contributions for the City tripling from $615 million in 2000 to $2.3 billion in 2004, and projected to reach $4.7 billion by 2008. To address these rising expenses and align benefits with other large employers, the state should transition to defined contribution plans and reform existing defined benefit structures by increasing employee contributions and raising retirement age requirements.
Recommendations related to Pension Costs
The long-run goal of pension reform should be to convert from defined benefit to defined contribution plans.
The New York systems should require a higher percentage contribution, and not limit it to ten years.
The New York system should adopt similar age thresholds to the federal Social Security system, perhaps with a lower minimum for police officers and firefighters.
The FAS should be based on five years’ experience and should take into account only base salary, excluding overtime and other supplements subject to manipulation.
The current system permits workers to claim disabilities at the time of retirement in ways that broaden access without clear evidence of a work-related cause, so these provisions should be revised to set more rigorous standards.
The City and State should eliminate the variable supplements available to some retired New York City uniformed workers, as these payments contradict the principle that pension payments should be a regular and predictable source of income.
Key Data
$615 million
— Required contributions to City pension funds in fiscal year 2000.
$2.3 billion
— Required contributions to City pension funds in fiscal year 2004.
$4.7 billion
— Projected required contributions to City pension funds by fiscal year 2008.
$218 million
— Required pension fund contributions from the State in 2000.
$592 million
— Required pension fund contributions from the State in 2004.
$1.4 billion
— Projected required pension fund contributions from the State in 2008.
No results for your current filters. Manually edit your filters, or
clear the filters.
Share Feedback
Give a star rating, write a comment of at least 10 words, or both.
