Public employee pensions in New York are retirement benefits provided to government workers, funded by employer contributions and investment returns managed by state and city comptrollers. This page covers CBC’s work on pension fund investment performance, the fiscal impact of benefit enhancements, contribution requirements for city and state budgets, and the long-term implications of pension funding strategies.
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..
The proposed change to Tier 6 pension benefits is unnecessary, expensive, and should be rejected.
Key Data
In June 2026, the CBCNY reported that a State-approved pension stretch-out reduces City contributions by $10.7 billion through fiscal year 2032 but will require $15.6 billion in higher contributions from fiscal years 2033 through 2037.
In June 2026, the CBCNY noted that the City's budget added $964 million in new recurring spending, which included $110 million for Tier 6 pension enhancements.
In March 2024, the CBCNY reported that proposed changes to Tier 6 pension benefits would cost State and local governments nearly $400 million annually, including a $320 million increase in pension contributions for public employees in the following year.
In November 2023, the CBCNY analyzed 20 bills passed by the Legislature that would enhance public employee benefits, including 10 bills to expand pension benefits, with 14 of these bills carrying an estimated cost of at least $50.7 million immediately and $30.3 million annually thereafter.
In November 2023, the CBCNY noted that pension returns in fiscal year 2023 averaged 8%, which was 1 percentage point above the 7% actuarially assumed rate of return, projecting to generate savings of roughly $50 million in fiscal year 2025, $120 million in fiscal year 2026, and $180 million in fiscal year 2027.
The city's fiscal plan includes a pension contribution stretch-out that reduces immediate costs by $10.7 billion through fiscal year 2032, but shifts the burden to future years by adding $15.6 billion in new contributions from fiscal years 2033 through 2037. Additionally, the budget allocates $110 million in recurring spending for Tier 6 pension enhancements.
Key Data
$10.7 billion
— Reduction in City pension contributions through fiscal year 2032 due to the stretch-out gimmick.
$15.6 billion
— Increase in new pension contributions required from fiscal years 2033 through 2037.
$110 million
— New recurring spending allocated for Tier 6 pension enhancements.
The fiscal year 2027 executive budget relies on a pension gimmick that shifts the burden of closing current budget gaps onto future residents in the mid-2030s. This strategy, which includes a $1.2 billion accrual sweep, serves as a temporary fix that fails to address long-term fiscal challenges.
Key Data
$1.2 billion
— The accrual sweep used as a one-shot measure to balance the fiscal year 2027 budget, which is part of the maneuvers criticized for shifting costs to future years.
New York State's budget is late for the fifth consecutive year, raising concerns about short-term decision-making that could lead to a self-inflicted fiscal crisis. To ensure long-term stability, the state should curb spending growth, maintain current tax levels, and reject expensive pension enhancements that threaten to increase property taxes or reduce services.
Recommendations related to Pensions
Reject costly, unnecessary Tier 6 pension enhancements that may drive property tax increases or service cuts.
791 is the number of staff the City Comptroller can employ for the vital task of auditing City agencies, managing the $306 billion pension fund, registering contracts, analyzing the budget, monitoring the economy—essentially serving as the people's check on the Mayor's office. This episode of What's the Data Point involves…
Fifty years after the 1975 fiscal crisis, New York City faces a precarious budget situation that requires renewed fiscal discipline and civic leadership to ensure long-term stability. While public employee pension funds were historically utilized to help the City avoid default during the 1975 crisis, current challenges necessitate a focus on modernizing government and prioritizing effective, evidence-based services.
$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.
New York State's budget proposals include unnecessary pension sweeteners and a plan to defer New York City pension contributions, which would weaken the state's long-term fiscal health. These measures should be rejected to ensure the state maintains its financial stability and avoids shifting current obligations to future taxpayers.
Recommendations related to Pensions
The State should reject shifting New York City pension contributions to the future.
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…
The proposed enhancements to the Tier 6 retirement plan are considered unnecessary and expensive, as the current plan is already more generous than most private-sector alternatives. Consequently, these changes should be rejected to maintain fiscal responsibility within the state budget.
The proposed expansion of Tier 6 pension benefits would impose a significant, unfunded financial burden on New York State and local governments, costing nearly $400 million annually. This change would further increase public employee pension contributions by $320 million in the coming year, despite the existing plan already offering more generous terms than most private-sector retirement options.
Recommendations related to Pensions
The proposed change to Tier 6 pension benefits is unnecessary, expensive, and should be rejected.
Key Data
$400 million
— 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 resulting from the proposed change.
The New York State Legislature passed 20 bills that would enhance pension, disability, and death benefits for public employees, carrying an estimated immediate cost of at least $50.7 Million and $30.3 Million annually thereafter. These benefit sweeteners, which include expanding eligibility and altering salary calculations, increase public costs outside of the regular budget process without providing offsetting savings or service enhancements.
Recommendations related to Pensions
The Governor should veto S5027/A5208 and 19 other bills because they enhance pension and other benefits and increase costs to New York State and local governments outside of the budget process, without enhancing services or finding offsetting savings.
The Governor should veto S4972/A5136, which would extend to Tier 6 members of the Police and Fire Retirement System a one-year final average salary calculation, because it would enhance pension benefits and increase costs.
The Governor should veto S5653/A5679, which would allow Tier 6 uniformed court officers and peace officers to retire without an early age reduction, because it would enhance pension benefits and increase costs.
Key Data
$50.7 Million
— Estimated immediate cost of 14 bills passed by the Legislature that enhance public employee benefits.
$30.3 Million
— Estimated annual cost thereafter of 14 bills passed by the Legislature that enhance public employee benefits.
10
— Number of bills passed by the Legislature that would enhance pension benefits.
9
— Number of bills passed by the Legislature that would expand disability or death benefits.
$23.4 Million
— Estimated immediate past service costs for S4972/A5136, which would extend a one-year final average salary calculation to certain Tier 6 members of the Police and Fire Retirement System.
$12.2 Million
— Estimated immediate past service costs for S5653/A5679, which would allow certain Tier 6 uniformed court and peace officers to retire without an early age reduction.
In fiscal year 2023, New York City's pension returns averaged 8 percent, exceeding the 7 percent actuarially assumed rate of return. This performance results in projected savings of $50 million in fiscal year 2025, $120 million in fiscal year 2026, and $180 million in fiscal year 2027, which the financial plan must account for.
Key Data
8 percent
— Average pension returns in fiscal year 2023.
7 percent
— Actuarially assumed rate of return for pension investments.
$50 million
— Projected pension savings in fiscal year 2025.
$120 million
— Projected pension savings in fiscal year 2026.
$180 million
— Projected pension savings in fiscal year 2027.
New York City faces significant budget gaps driven by factors including new spending, collective bargaining, and pension costs, which have outpaced previous savings efforts. Restructuring operations to reduce costs is essential to address these fiscal challenges, regardless of the financial strain caused by the migrant crisis.
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
NYC Budget Director Jacques Jiha briefed CBC Trustees on the New York City Fiscal Year 2024 Executive Budget. Director Jiha was appointed to serve as Budget Director in October 2020. He oversees New York City’s fiscal policy, including the development of the Expense and Capital Budgets, the City’s bond finance…
The New York City Fiscal Year 2024 Executive Budget allocates $2.7 billion for NYPD pension contributions as part of its total $10.8 billion budget. Additionally, the recently ratified Police Benevolent Association collective bargaining agreement includes $350 million specifically designated for fringe benefits and pension contributions in fiscal year 2024.
Key Data
$2.7 billion
— Allocated for NYPD pension contributions in the Fiscal Year 2024 Executive Budget.
$350 million
— Portion of the PBA collective bargaining agreement costs designated for fringe benefits and pension contributions in fiscal year 2024.
$900 million
— Estimated cost for fringe benefits and pension contributions associated with retroactive payments covering fiscal years 2018 through 2023.
New York City faces widening budget gaps of $4.6 billion in fiscal year 2025 and $5.9 billion in fiscal year 2026, largely driven by increased pension costs resulting from poor market returns. To ensure future fiscal stability and avoid service cuts or tax increases, the City must take immediate action to restrain long-term spending and improve operational efficiency.
Key Data
$4.6 billion
— The projected budget gap for fiscal year 2025, which was widened by increased pension costs.
$5.9 billion
— The projected budget gap for fiscal year 2026, which was widened by increased pension costs.
The New York State Legislature passed 20 benefit sweetener bills in 2022, including 12 that would expand pension benefits, which would collectively cost at least $78.6 million immediately and $21.0 million annually thereafter. These bills should be vetoed because they increase public costs outside of the regular budget process without providing service enhancements or offsetting savings.
Recommendations related to Pensions
The Governor should veto the twelve bills that expand eligibility and/or pension benefits for public employees.
The Governor should veto S4523/A6457, which would establish a 20-year retirement plan for certain State law enforcement positions.
The Governor should veto S8401/A9581, which would extend to Tier 6 members of the Police and Fire Retirement system a one-year final average salary calculation.
The Governor should veto S6985B/A7873A, which would amend the pension structure of vested automotive members of the New York City Employees' Retirement System.
The Governor should veto S8682/A9440, which would establish a 25-year retirement plan for Deputy Sheriffs in Monroe County.
The Governor should veto S9327/A10360, which would allow Tier 3 and 3R members of the New York City Police Pension Fund to borrow against their contributions.
The Governor should veto S6980B/A10029, which would allow Tier 3 members of the New York City Fire Pension Fund to receive service credit for prior employment as an emergency medical technician.
The Governor should veto S6981B/A7971A, which would exempt certain members from required additional pension contributions if they will not reach 25 years of service prior to 57 years of age.
The Governor should veto S6988B/A7962A, which would establish a 25-year retirement plan for fire protection inspectors who are members of the New York City Employees' Retirement System.
The Governor should veto S5557A/A7383A, which would allow police officers of the New York City Department of Environmental Protection to transfer service credit to the New York State and Local Police and Fire Retirement System.
Key Data
12
— bills passed by the Legislature in 2022 that would enhance pension benefits for public employees.
$78.6 million
— estimated immediate past service costs for the fifteen benefit sweetener bills with attached fiscal notes.
$21.0 million
— estimated annual costs thereafter for the fifteen benefit sweetener bills with attached fiscal notes.
$55.6 million
— estimated immediate past service costs for bill S4523/A6457 to establish a 20-year retirement plan for certain State law enforcement positions.
$14.5 million
— estimated annual costs beginning for bill S4523/A6457 to establish a 20-year retirement plan.
$15.2 million
— estimated immediate past service costs for bill S8401/A9581 to extend a one-year final average salary calculation to Tier 6 members of the Police and Fire Retirement system.
Pension fund investment losses from fiscal year 2022 are creating significant budgetary pressure, requiring the City to increase contributions by $861 million in fiscal year 2024, $2.0 billion in fiscal year 2025, and $3.0 billion in fiscal year 2026. These rising costs represent a substantial financial risk that was not reflected in previous budget gap projections.
Key Data
$861 million
— The amount the City must increase pension contributions in fiscal year 2024 due to investment losses.
$2.0 billion
— The amount the City must increase pension contributions in fiscal year 2025 due to investment losses.
$3.0 billion
— The amount the City must increase pension contributions in fiscal year 2026 due to investment losses.
Poor stock-market performance is expected to force New York City to increase its annual pension contributions by $2 billion to $3 billion above budgeted levels. This additional financial pressure contributes to the city's projected budget gaps, necessitating careful fiscal management and spending restraint.
Key Data
$2 billion to $3 billion
— The amount by which annual pension contributions are expected to exceed the budget due to poor stock-market performance.
The November 2021 Financial Plan for New York City projects budget gaps of $2.9 billion for fiscal year 2024 and $2.1 billion for fiscal year 2025, while noting lower pension spending due to strong investment returns. The plan relies on non-recurring funds to support ongoing programs, creating potential fiscal cliffs as federal COVID-19 aid is depleted.
Brad Lander is the NYC Comptroller-elect and current member of the New York City Council, representing the 39th District in Brooklyn. He serves as the Council’s Deputy Leader for Policy, and he co-founded the Council’s Progressive Caucus. Prior to serving in the City Council, Brad directed the Pratt Center for…
$250 billion—the assets held by the five pensions funds for which the New York City Comptroller is custodian, administrator, and investment advisor. But that's not the Comptroller's only responsibility. On today's special episode of "What's the [DATA] Point?" with an introduction from Ben and Andrew, listeners will hear CBC's "Comptroller…
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…
Offering early retirement incentives to city workers is a fiscally irresponsible strategy that costs an average of $110,000 per participant, often rewarding employees who would have retired regardless. Instead of paying for these incentives, the city should continue managing workforce size through natural attrition and strategic hiring to maintain fiscal stability.
Recommendations related to Pensions
The city should flatly reject the opportunity to offer early retirement incentives to civilian employees.
The city should shrink its workforce by selectively refilling vacancies created by departed employees rather than paying staff to leave.
The city should strategically hire to meet service needs and phase in organizational changes to reach a target workforce size of around 310,000.
Key Data
$110,000
— Average cost to the city for every person who takes the early retirement incentive.
$110 million
— Total cost for every 1,000 employees taking the early retirement incentive, spread over 4 years.
one-third
— Portion of those electing the state’s 2010 early retirement incentive who would have retired without it.
$250 million
— Estimated cost the city would incur to achieve a 2,250 position reduction through early retirement incentives.
312,250
— Total city workforce size in February 2021 following a partial hiring freeze.
The City of New York has proposed changes to its pension fund actuarial assumptions, including lowering the interest rate to 6.8 percent, which will reduce contributions in the short term but increase them in fiscal years 2024 and 2025. These adjustments, which also include updating asset values and mortality tables, result in a net reduction of $17 million in total contributions over a five-year period.
Recommendations related to Pensions
Lowering the actuarial interest rate to 6.8 percent over four years, from the current 7.0 percent, would be prudent and bring the City’s pension funds in line with New York State’s funds.
Key Data
$17 million
— Total reduction in pension contributions over five years resulting from the proposed changes.
$430 million
— Reduction in pension contributions for fiscal year 2021.
$350 million
— Increase in pension contributions for fiscal year 2024.
$436 million
— Increase in pension contributions for fiscal year 2025.
6.8 percent
— Proposed actuarial interest rate for the City's pension funds.
7.0 percent
— Current actuarial interest rate for the City's pension funds.
Managing the City’s fiscal crisis well will be a critically important duty of the next Mayor and a primary determinant of how the city survives the current crisis, and ultimately thrives in the future. Managing NYC’s Fiscal Crisis: A CBC Mayoral Candidate Forum featured a 10-minute conversation with each candidate,…
Early retirement incentives, while intended to reduce workforce costs, often prove more expensive than attrition due to the high cost of pension credits and the likelihood of paying employees who would have retired regardless. Instead of pursuing these incentives, municipalities should rely on attrition and strict hiring freezes to manage fiscal stress, as evidenced by the potential for significant savings under voluntary separation models.
Recommendations related to Pensions
The City should reduce its workforce through attrition and not pursue the Early Retirement Incentive (ERI).
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.
Key Data
$110,000
— Average additional pension contribution per retiree estimated by the Actuary for the City of New York.
$1.1 billion
— Total incentive cost of the proposed Early Retirement Incentive.
$5.9 billion
— Potential five-year salary savings if positions vacated by the Early Retirement Incentive are kept vacant.
32 percent
— Portion of the Early Retirement Incentive incentive cost likely to be an unneeded expense, flowing to employees who would have retired anyway.
73.1 percent
— Current funding ratio of the Los Angeles pension fund, which declined from 90.1 percent before the Great Recession.
Early retirement incentives are a less cost-effective strategy for workforce reduction than natural attrition, as they incur significant additional pension costs that erode potential savings. Implementing such incentives would result in lower net savings for the City compared to allowing employees to leave through voluntary separation.
Recommendations related to Pensions
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.
$1.1 billion
— Estimated cost of the early retirement incentive if 10,000 employees participate.
$3.3 billion
— Projected net savings over five years if 10,000 employees take the early retirement incentive and the City fills one-third of vacancies.
$4.3 billion
— Projected net savings over five years if 10,000 employees leave through voluntary attrition and the City fills one-third of vacancies.
$92,400
— Additional average pension contribution per retiree under Part A of the early retirement incentive over five years.
$128,800
— Additional average pension contribution per retiree under Part B of the early retirement incentive over five years.
New York City faces a significant fiscal crisis requiring $1 billion in recurring labor savings, which can be achieved through reforms to health insurance, work rules, and pension-related benefits. Specifically, the city should eliminate or reform Variable Supplement Funds and the Tax-Deferred Annuity program to reduce taxpayer-funded liabilities and improve the long-term stability of pension funds.
Recommendations related to Pensions
The City should seek State legislation to eliminate the VSFs and have the assets transferred to the main pension funds.
The guaranteed return on the fixed return fund should be sharply reduced through State legislation.
Reforms could be implemented to reduce the risk and cost of the TDA by converting the fixed return to a variable return or a similar plan offered to federal employees.
City contributions to annuity funds are negotiated with each union, and should be reduced or eliminated.
Key Data
$9.9 billion
— Annual cost of pensions in the FY2020 budget.
$4.9 billion
— Estimated assets in the police Variable Supplement Fund.
$1.2 billion
— Estimated annual value of the taxpayer-provided TDA guarantee.
$1.5 billion
— Total transfers from pension funds to VSFs in fiscal year 2018.
$552 million
— VSF payments made to retirees in fiscal year 2019.
$842 million
— Estimated assets in the fire Variable Supplement Fund.
New York City's municipal labor costs, which include significant pension and health insurance expenditures, require structural reforms to achieve necessary recurring savings and avoid layoffs. Implementing changes such as consolidating welfare funds, reforming health insurance premium sharing, and eliminating or modifying specific differentials and supplemental funds can help the city manage its fiscal crisis while maintaining essential services.
Recommendations related to Pensions
The City should seek State legislation to eliminate the VSFs and have the assets transferred to the main pension funds to improve funding ratios and preserve core retirement benefits.
The City should reduce or eliminate contributions to union annuity funds, which are in addition to the nearly $10 billion in annual pension contributions.
The City should reform the tax-deferred annuity (TDA) by sharply reducing the guaranteed return on the fixed return fund through State legislation to protect the Teachers Retirement System from being highly leveraged.
Key Data
$9.9 billion
— The amount spent on pensions in fiscal year 2021.
$4.9 billion
— Estimated assets in the police Variable Supplement Fund (VSF).
$1.5 billion
— Total transfers from pension funds to VSFs in fiscal year 2018.
$842 million
— Estimated assets in the fire Variable Supplement Fund (VSF).
$416 million
— Estimated assets in the corrections Variable Supplement Fund (VSF).
$124 million
— City contributions to union annuity funds in fiscal year 2020.
In fiscal year 2020, the New York City Police Department's budget included $2.8 billion specifically for pensions, which are noted as being more generous than those for other city employees. These pension costs represent a significant portion of the department's centrally allocated expenses, which have grown by $610 million since fiscal year 2010.
Key Data
$2.8 billion
— The amount allocated for <b>pensions</b> within the NYPD's centrally allocated costs in fiscal year 2020.
$2,755 million
— The total cost of <b>pensions</b> for the NYPD in fiscal year 2020, representing 25 percent of centrally allocated expenses.
$610 million
— The growth in <b>pension</b> costs contributing to the increase in centrally allocated expenses between fiscal years 2010 and 2020.
State and local governments facing economic stress have various fiscal strategies available, including the use of reserves, expenditure reductions, and borrowing. Deferring government contributions to employee pension funds is identified as a harmful form of borrowing that imposes significant long-term costs on future taxpayers.
New York City's pension contributions grew from $8.3 billion in fiscal year 2014 to $10.0 billion in fiscal year 2019, representing an average annual increase of 3.8 percent. These costs are determined by the City's Actuary based on projections of future liabilities, which are influenced by increases in municipal headcount and average employee salaries.
Key Data
$8.3 billion
— Pension contributions in fiscal year 2014.
$10.0 billion
— Pension contributions in fiscal year 2019.
The City is currently recognizing savings in pension costs resulting from accounting changes to the Tax Deferred Annuity funds provided to educators. There are ongoing concerns regarding the expensive guarantees associated with these funds and the potential risks they pose to both pension funds and taxpayers.
The state legislature has passed 18 bills that would expand pension and disability benefits for various public employees, which would cost at least $71 million in the first year. These measures threaten to undermine previous fiscal reforms and should be vetoed to prevent unnecessary increases in public personnel costs.
Recommendations related to Pensions
The Governor should veto all 18 bills passed by the Legislature to enhance pension or disability benefits.
The Governor should veto A7620-A/S5903-A, which would cost $5.6 million annually to allow New York City police officers to receive retirement credit for time spent as cadets.
The Governor should veto all the bills to send a strong message that past reforms will not be overturned.
The Governor should continue the tradition of rejecting benefit sweeteners to effectively contain personnel costs.
Key Data
$71 million
— Projected first-year cost of the 18 bills passed by the Legislature.
$5.6 million
— Annual cost of A7620-A/S5903-A to allow New York City police officers to receive retirement credit for time spent as cadets.
$41 million
— First-year cost of A4431/S5207, the most expensive bill passed.
$15.7 million
— First-year cost of A7874-A/S5905-A requiring New York City paraprofessionals to join the Teachers Retirement System.
$2.76 million
— First-year cost of A5940/S3659 regarding Tier 6 uniformed court officers.
$2.1 million
— First-year cost of A5324/S5133 regarding Nassau County ambulance medical technicians.
Between fiscal year 2014 and fiscal year 2019, the New York City budget grew by $19 billion, with 9% of that increase attributed to pension costs. This growth was driven by federal and state mandates, inflationary costs, collectively bargained wage increases, and spending priorities of the de Blasio Administration.
Key Data
9%
— Portion of the $19 billion total New York City budget growth from fiscal year 2014 to fiscal year 2019 allocated to pensions.
New York City faces significant long-term financial obligations, with net pension liabilities totaling $47.8 billion as of fiscal year 2018. These pension costs are part of a broader set of long-term liabilities that also include $111.0 billion in bonded debt and $98.5 billion in net other post-employment benefits.
Key Data
$47.8 Billion
— Net pension liabilities for New York City as of fiscal year 2018.
The Metropolitan Transportation Authority faces a significant fiscal shortfall, necessitating labor cost controls through collective bargaining agreements that include productivity improvements and increased employee contributions to fringe benefits. While pension benefits for current employees are fixed, the authority should pursue state legislation to modify pension contribution rates and benefit calculations for future employees to reduce long-term costs.
Recommendations related to Pensions
The state should pass legislation to increase new member contribution rates to reduce long-term costs.
The state should enact legislation to change benefit calculations for future employees to reduce long-term costs.
Management and labor should discuss pension modifications as part of the collective bargaining process where both sides agree to support legislation to enact such changes.
Key Data
$1.4 Billion
— Total employer contributions to the six associated pension systems.
$161 Million
— Total member contributions to the six associated pension systems.
9:1
— Ratio of employer contributions to member contributions for the pension systems.
New York City's long-term liabilities for bonded debt, pensions, and other postemployment benefits reached a record $257.3 billion in fiscal year 2018, an increase of $4.7 billion from the previous year. While pension liabilities decreased by $8.5 billion due to strong investment returns and increased contributions, the city's pension funds remain 75.9 percent funded.
Key Data
$8.5 billion
— The amount by which the city's pension liability decreased due to strong investment returns and increased budgetary contributions.
75.9 percent
— The aggregate funding level of the city's pension funds.
New York State has implemented reforms to its employee retirement system, including the creation of a less generous Tier 6 for new employees, which has helped restrain pension cost growth. While the state's pension commitments are currently well-funded, the state continues to face significant liabilities regarding retiree health insurance.
Key Data
27 percent
— Tier 6 employees represented 27 percent of state and local membership in fiscal year 2017.
$13,000
— Pension benefits cost an average of $13,000 per employee in fiscal year 2019.
The expansion of the municipal workforce significantly increases long-term financial liabilities, specifically regarding pension and retiree health benefits. With unfunded pension liabilities reaching $56.2 billion at the end of fiscal year 2017, the addition of new full-time hires further exacerbates these long-term costs.
Key Data
$180.9 million
— The amount added to fiscal year 2019 accrued pension liabilities by new full-time hires.
$56.2 billion
— The total unfunded pension liability at the end of fiscal year 2017.
New York City's pension costs for public employees are projected to grow steadily, with nearly $10 billion allocated in the fiscal year 2019 budget. Proposed legislation to increase pension benefits for police and firefighters would add millions in costs and threaten the fiscal stability achieved by 2012 reforms.
Recommendations related to Pensions
The State Legislature and City Council should reject bills that would hike the cost of pensions for NYC police and firefighters.
The Council and the Legislature should not pass an unwarranted pension sweetener that will be bitter for taxpayers.
The city should maintain the 2012 reforms that created more reasonable benefits for newly hired city employees.
Key Data
$10 billion
— Amount devoted to pensions for public employees in the fiscal year 2019 budget.
$20 million
— Estimated cost of one proposed pension bill in the next year.
$74,500
— Average annual pension for a recently retired NYC police officer.
$118,000
— Average annual pension for a recently retired firefighter.
$35,000
— Average annual pension for a civilian employee.
$200,000
— Value of total compensation for a police officer at 5½ years of service.
The New York City Fiscal Year 2019 Executive Budget increases operating spending by 5.8 percent, more than twice the rate of inflation, while failing to bolster reserves despite strong tax revenue growth. The financial plan includes a reserve for potential increases in pension costs starting in fiscal year 2021, contingent upon the completion of an actuarial audit.
The Long Island Rail Road faces higher operating costs than Metro-North, partly due to legacy expenses including a closed, underfunded pension plan and higher retiree health insurance costs. Addressing these financial disparities requires the Metropolitan Transportation Authority to prioritize productivity reforms and work rule standardization in future collective bargaining agreements.
Recommendations related to Pensions
MTA management should begin identifying its agenda for improved productivity.
Simply standardizing work rules across the two railroads could help generate savings.
The MTA should seek productivity commitments in future rounds of collective bargaining to impact the finances of the commuter railroads.
Key Data
$32 million
— Payments to cover the unfunded portion of the closed LIRR pension plan in 2017.
$17,773
— Average annual pension expense per position for the Long Island Rail Road in 2017.
$16,525
— Average annual pension expense per position for the Metro-North Railroad in 2017.
$5,123
— Average annual expense per position for the closed LIRR pension plan in 2017.
72 percent
— Portion of operating expenses at the commuter railroads accounted for by total labor expenses in 2017.
New York State Comptroller Tom Dinapoli addressed CBC on March 26, 2018. His remarks covered Wall Street performance and the City economy, the State and City budgets, and State pension funds.
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…
This week's datapoint is 2008 - the year in which NYC's economy entered the Great Recession. Special guest John Breit, former chief risk advisor to Merrill Lynch, shares with us his unique perspective on the recession and on the risks of the City's investments in the pension funds.
Average compensation for city employees is projected to rise to $158,000 by 2021, a figure that includes salaries, health insurance, and pension contributions. While the data illustrates the growing cost of fringe benefits, it does not provide specific analysis or policy recommendations regarding the pension system itself.
New York City's Teachers' Retirement System offers a tax-deferred annuity plan with a guaranteed 7 percent return that costs taxpayers $1.2 billion annually due to the gap between this guarantee and market interest rates. This arrangement creates a significant financial burden and risks the viability of the pension system by leveraging assets, necessitating reform to align the plan with standard market-based investment options.
Recommendations related to Pensions
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.
The unique, and uniquely expensive, arrangement for the teachers’ TDA plan should be reformed.
Key Data
$1.2 Billion
— The taxpayer subsidy for the TDA fixed return fund in fiscal year 2015.
$238 Million
— The taxpayer subsidy for the TDA fixed return fund in fiscal year 2007.
$18.7 Billion
— The total amount of money in the TDA fixed return fund in fiscal year 2015.
7.0%
— The guaranteed interest rate on the TDA fixed fund option for most participants.
36%
— The portion of the total taxpayer contribution to the TRS QPP that the 2015 taxpayer subsidy represented.
42%
— The level of leveraging of TDA funds represented in 2015.
The Metropolitan Transportation Authority faces significant long-term financial risks, including nearly $14 billion in unfunded other postemployment benefit (OPEB) liabilities for which current assets cover less than 2 percent. To address these fiscal challenges, the agency must prioritize setting aside additional resources for its OPEB trust fund while managing rising labor costs and expiring contracts.
Recommendations related to Pensions
The MTA should set aside additional resources for the agency’s OPEB trust fund to better manage long-term liabilities.
Key Data
$14 billion
— MTA’s OPEB liability as of March 31, 2016.
2 percent
— MTA’s assets for OPEB as a percentage of the total outstanding liability.
$608 million
— OPEB current payment listed in the 2017 financial plan.
$57 million
— Planned deposits for OPEB trust funds from 2018 to 2020.
New York City's legacy costs, which include debt service, pension contributions, and retiree health benefits, are projected to grow to over $20 billion by fiscal year 2020. To address this, the City should reform retiree health benefits and union welfare funds to achieve significant savings and curb the growth of these long-term obligations.
Key Data
$17.4 billion
— Current annual legacy costs composed of debt service, pension contributions, and retiree health benefits.
$20.9 billion
— Projected annual legacy costs by fiscal year 2020.
$1.6 billion
— Total savings that could be achieved by fiscal year 2020 through reforms to retiree health benefits and union welfare funds.
Legacy costs, which include debt service, pension contributions, and retiree health benefits, consume over 20% of New York City's budget and are projected to grow to $20.9 billion by fiscal year 2020. While pension contributions are constitutionally protected and rising to $9.7 billion by 2020, the city faces significant fiscal pressure from these fixed obligations.
Key Data
$9.2 billion
— FY2016 annual pension contributions made by the City to public employee pension funds.
$9.7 billion
— Projected annual pension contributions by fiscal year 2020, assuming a 7% investment target.
7%
— The annual investment target for public employee pension funds.
Municipal employee compensation is rising rapidly, with average costs per full-time employee projected to reach $158,000 by 2020, significantly outpacing private sector growth. While health insurance premiums are a primary driver of these costs, pension contributions are also increasing, contributing to a broader fiscal challenge for the city.
Key Data
$1,270
— The projected increase in **pension contributions** per employee.
Mayor de Blasio’s Financial Plan projects a $17.9 billion increase in city spending through fiscal year 2020, driven primarily by rising personal service costs, including salaries, health insurance, and pension contributions. The report details how this spending growth is distributed across various city agencies, with the Department of Education accounting for the largest share of the increase.
Key Data
$1.5 Billion
— The projected increase in pension fund contributions between fiscal years 2014 and 2020.
9%
— The increase in pension contributions per employee between fiscal years 2014 and 2020.
The New York State Legislature has introduced 8 new bills to enhance public employee and retiree benefits, adding to a list of over 60 similar proposals. These measures include significant increases to disability benefits and pension calculations for uniformed personnel, with projected costs for the City reaching millions of dollars annually.
Key Data
8
— Number of new bills introduced to enhance the benefits of State and local public employees and retirees.
60
— Number of additional bills introduced to date in the Benefit Sweeteners Scorecard.
$4.7 million
— Cost to the City in 2017 for the proposed firefighter disability benefit plan.
$8.3 million
— Cost to the City in 2021 for the proposed firefighter disability benefit plan.
$27 million
— Increase in New York City pension contributions in 2017 for the proposed police officer disability benefit bill.
$40 million
— Increase in New York City pension contributions in 2021 for the proposed police officer disability benefit bill.
New York State is considering over 60 legislative bills that would increase public employee benefits, including pension enhancements, disability payments, and early retirement plans, potentially costing taxpayers hundreds of millions of dollars annually. These proposed benefit sweeteners threaten to undermine previous fiscal reforms and should be rejected to avoid imposing unnecessary financial burdens on state and local governments.
Recommendations related to Pensions
The Legislature should reject the bills detailed in the scorecard that would impose expensive mandates on New York State and local governments without improving services for taxpayers.
Policymakers should maintain existing hard-fought reforms that yield significant savings rather than enhancing expensive employee benefits.
The State should avoid passing bills that enhance disability benefits for recently hired New York City police and fire employees, as these would roll back important and sensible reforms.
Key Data
$21 billion
— Projected savings over 30 years from reforms to disability benefits for recently hired New York City police and fire employees.
$46 million
— First-year cost of the most expensive bill (A4295) that would allow a judge or justice to elect to have the most recent annual salary used as the basis for calculating pension amounts.
$3 million
— Cost of retroactive payments for a bill (A3879-b/S1968-a) that would allow certain State Department of Corrections and Community Service superintendents to opt out of the half pay after 25 years of service pension plan.
$21 million
— Annual cost to the New York City Transit Authority of a bill (A9850/S7232) that would decrease the employee contribution rate under the 25-year/55-age plan.
$16 million
— Annual cost to New York City of a bill (A6988/S5972) that would provide variable supplement fund payments to those who retired between 1968 and 1987.
$13.9 million
— First-year cost of bill A7801-A/S5936, which would enhance in-service death benefits for State correction officers who are retirement eligible.
New York City's preliminary $82 billion budget increases spending by 4.5 percent, driven by factors like rising pension contributions and support for NYC Health + Hospitals. While the city benefits from record employment and property values, the current financial plan lacks a robust savings strategy to bolster reserves and offset the costs of new programs.
The Governor's proposed budget for fiscal year 2016-2017 includes considerations regarding the enhancement of disability pension benefits for rookie police officers and firefighters. This budget proposal will determine whether the state adopts the previously agreed-upon enhancements or pursues more expansive changes to these benefits.
Proposed legislation in 2015 sought to expand disability benefits for uniformed employees, including police, fire, sanitation, and correction officers, by restoring prior cost-of-living adjustments and altering final average salary calculations. These changes would have significantly increased city pension costs, with some proposals adding hundreds of millions of dollars in actuarial present value to city contributions.
Key Data
$39.1 Million
— FY2015 budget increase associated with bill S5656, which includes improved disability benefit provisions for sanitation and correction uniformed employees.
$889.3 Million
— Actuarial present value of NYC contributions by FY2019 for bill S5656.
$37.8 Million
— FY2015 budget increase associated with bill A6046/S4269, which grants disability benefits to Tier 3/6 police and fire uniformed employees.
$850.2 Million
— Actuarial present value of NYC contributions by FY2019 for bill A6046/S4269.
$35.7 Million
— FY2015 budget increase associated with bill A5295, which modifies disability benefit calculations for Tier 3/6 police uniformed employees.
$622.9 Million
— Actuarial present value of NYC contributions by FY2019 for bill A5295.
During the 2015 legislative session, over 50 bills were introduced to enhance public employee pensions, threatening the fiscal savings achieved by the 2012 Tier VI reforms. To protect these gains, the Governor is urged to veto four specific bills that would increase the cost of public employee retirement benefits.
Recommendations related to Pensions
The Governor should veto A7490/S3010, A6771A/S4907, A5327C/S3948B, and A7547/S5785 to prevent increased costs for public employee retirement benefits.
State officials should ensure that 'sweeteners' are not permitted to undo the hard-won savings achieved from 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.
NY1 When it comes to police and firefighters, Governor Andrew Cuomo wants to roll back part of the pension reform he helped push through the state legislature in 2012.
New York State has deferred $2.5 billion in pension contributions since 2010 and proposes borrowing an additional $1.8 billion through 2020, a practice that increases long-term costs and risks weakening the fiscal health of the funds. Instead of continuing this borrowing, the state should utilize a portion of its $5.4 billion bank settlement windfall to repay existing pension liabilities and avoid future interest expenses.
Recommendations related to Pensions
The State should end the practice of borrowing from public employee pension funds, not extend it.
The State should use available bank settlement funds to reduce the outstanding liability from past pension borrowings.
The State should reverse the planned $713 million pension borrowing for this year.
The State should reverse the proposed $395 million pension deferral for next year.
The State should allocate a portion of the $5.4 billion windfall from bank settlements to early repayment of prior-year amortizations.
Key Data
$5.4 Billion
— Unexpected revenue from bank settlements.
$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 borrowings.
$713 Million
— Amount the State will defer in pension payments this year.
$1.1 Billion
— Total deferrals from fiscal year 2016 through 2020.
$780 Million
— Total interest costs the State will reach under the Executive Budget proposal.
New York State has deferred $3.2 billion in required payments to state employee pension funds, and the proposed fiscal year 2016 budget includes an additional $395 million in such borrowing. This practice of deferring pension contributions is unwarranted given the state's current surplus resources and should be rejected.
Recommendations related to Pensions
The state should reject the proposal to defer pension fund contributions, as further deferral is unwarranted when state coffers are awash in surplus resources.
Key Data
$3.2 billion
— Amount of required payments to state employee pension funds that will have been deferred by the end of the current fiscal year.
$395 million
— Additional borrowing from pension funds proposed in the fiscal year 2016 Executive Budget.
New York State should utilize the $5 billion windfall from bank settlements to improve long-term fiscal health by reducing liabilities rather than creating new recurring costs. Priority should be given to investments that prepare the state for future challenges, such as fully funding the State’s pension funds.
Recommendations related to Pensions
The State should prioritize plans to reduce long-term liabilities, such as fully funding the State’s pension funds.
New York City's Variable Supplement Fund payments, often called 'Christmas bonuses,' provide $12,000 annual checks to retired uniformed officers, costing the city $500 million in 2014 and draining resources from pension funds. Because these payments are not constitutionally protected, the city should pursue legislative action to phase them out to improve the fiscal health of pension funds and lower taxpayer contributions.
Recommendations related to Pensions
Phasing out or eliminating the VSF should be part of the Mayor and City Council’s agenda in Albany next year.
Gradually eliminating these unusual pension bonuses for retirees would enhance the fiscal condition of the pension funds and reduce the needed contributions from taxpayers.
Key Data
$500 million
— Total cost of Variable Supplement Fund (VSF) payments made to eligible retirees in 2014.
$2.9 billion
— Transfer from the pension funds to the VSFs in fiscal year 2014, which increased their net assets.
17.5 percent
— Combined return on the pension system's $150.3 billion investments in fiscal year 2014.
$8.6 billion
— Total pension contributions required in the fiscal year 2015 budget.
11.3 percent
— Portion of the fiscal year 2015 budget comprised of pension contributions.
$12,000
— Annual check amount received by eligible retired New York City police, fire, and correction officers.
The Railroad Retirement Board has failed to implement sufficient safeguards to prevent a recurrence of the widespread disability pension fraud scheme involving Long Island Rail Road employees that cost over $1 billion. Despite audit findings of systemic issues and inadequate verification processes, the agency must adopt rigorous oversight measures to ensure the integrity of the disability determination program.
Recommendations related to Pensions
The Railroad Retirement Board should use better earnings data to monitor the income of disability beneficiaries.
The agency must conduct a supervisory review of all disability claims to ensure sufficient supporting documentation.
The Railroad Retirement Board should develop a quality assurance review for the disability determination process to improve oversight.
The agency needs to develop performance goals to guide the administration of the disability program.
The Railroad Retirement Board must establish procedures to identify and to address potential fraud within the disability program.
Key Data
$1 billion
— Estimated total cost of false disability claims paid by the Railroad Retirement Board.
$400 million
— Amount in restitution and forfeiture ordered to be paid by those found guilty of fraud.
96 percent
— Rate of reviewed disability claims from LIRR employees that were approved in March 2013.
$10,500
— Maximum annual earnings allowed for disabled beneficiaries under federal law.
1,500
— Number of retirees involved in the disability fraud conspiracy from the late 1990s through 2008.
Proposed legislation A9594/S7326 threatens to reverse 2012 pension reforms that are projected to save the city $31 billion over 30 years. If enacted, the bill would increase city costs by $35 million in fiscal year 2015, with actuarial contributions for the new benefits rising to $617.9 million by 2019.
Recommendations related to Pensions
The Mayor should oppose the supporting home rule message under consideration in the City Council regarding bill A9594/S7326.
The Mayor should oppose the bill A9594/S7326 itself, which would reverse recent pension reforms.
The City should maintain the current pension tiers that are helping to lower costs and balance the budget.
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 from the 2012 pension reforms.
$35 million
— Increase in the City's costs in fiscal year 2015 due to the proposed changes to police disability pensions.
$266.4 million
— Actuarial value of contributions required by the City to fund the new benefit in fiscal year 2015.
$617.9 million
— Actuarial value of contributions required by the City to fund the new benefit in fiscal year 2019.
The municipal workforce in New York City is aging, with over one-third of experienced employees eligible for retirement within five years, largely due to pension systems that reward long-term service. To attract younger talent, the City should implement more flexible retirement options, such as defined contribution plans that offer quicker vesting and benefit portability.
Recommendations related to Pensions
City employees need more flexible retirement options.
The City should offer a defined contribution retirement plan, which allows for quick vesting and portability of benefits, to attract younger workers.
Key Data
23%
— At the end of fiscal year 2012, 23% of the City’s municipal workforce was over age 55.
19%
— At the end of fiscal year 2012, 19% of the City's municipal workforce were eligible for retirement with full benefits.
15%
— An additional 15% of the City's municipal workforce will be eligible for retirement within five years.
Legacy costs in the New York City budget, which include pension contributions, retiree health benefits, and debt service, are projected to consume nearly 25 percent of the budget by fiscal year 2015. Specifically, annual pension contributions are the fastest-growing legacy cost, rising from $3.2 billion in fiscal year 2005 to a projected $8.2 billion by fiscal year 2015.
Key Data
$3.2 billion
— Annual pension contributions in fiscal year 2005.
$8.2 billion
— Projected annual pension contributions in fiscal year 2015.
The proposed state budget includes an optional 25-year, fixed-rate pension funding plan intended to provide short-term fiscal relief to local governments. This approach is discouraged because it could threaten the long-term viability of pension funds and undermine the state's history of timely pension payments.
Recommendations related to Pensions
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.
Key Data
25-year
— The duration of the optional, fixed-rate pension funding plan proposed to provide short-term fiscal relief for localities.
Governor Cuomo's proposal to implement a fixed-rate pension contribution plan for local governments threatens the long-term financial stability of the state's pension funds by artificially stabilizing rates below actuarially required levels. New York's pension systems currently maintain a strong 94% funding ratio, and maintaining this health requires paying full obligations as they come due rather than deferring costs to future taxpayers.
Recommendations related to Pensions
We believe this proposal would endanger the future financial viability of the pension plans and recommend you reject it.
We urge you to reject the proposal.
The safest bet for meeting the benefit obligations is to pay what is due when it is due.
Key Data
12%
— Pension payment rate for members of the Employees’ Retirement System under the proposed plan.
12.5%
— Pension payment rate for members of the Teachers’ Retirement System under the proposed plan.
18.5%
— Pension payment rate for members of the Police and Fire Retirement System under the proposed plan.
94%
— New York's pension funding ratio in 2010, with assets covering this portion of liabilities.
7.5%
— The assumed rate of return for pension investments.
2.9%
— The average five-year return on pension investments, which is substantially off the mark.
Governor Cuomo's proposal to implement a "fixed rate" pension contribution plan for local governments threatens the long-term financial stability of New York's pension systems by deferring necessary payments. Instead of stabilizing costs, this approach risks underfunding the systems, ultimately shifting the burden to future taxpayers to cover guaranteed retiree benefits.
Recommendations related to Pensions
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 plans.
Local governments should continue the practice of paying what is due when it is due to ensure the safest method for meeting benefit obligations.
The Board should reject the proposal as it does not provide meaningful, long-term relief for localities in fiscal distress and endangers the viability of the pension funds.
Key Data
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.
94%
— New York's pension system assets covering liabilities in 2010.
8%
— Assumed rate of return for the pension plans.
1.1%
— Average five-year investment returns for the pension plans.
New York City's required pension contributions grew five times over the last decade, peaking at $8 billion in fiscal year 2012, while health insurance costs are projected to reach nearly $7 billion by fiscal year 2016. These rising fringe benefit costs, including pensions and health insurance, present a significant fiscal challenge that threatens the City's long-term financial stability.
Key Data
$8 billion
— The peak of the City's required pension contributions in fiscal year 2012, which grew five times over during the previous decade.
five times
— The growth factor of the City's required pension contributions over the last decade leading up to fiscal year 2012.
New York City's budget faces structural deficits driven by large, growing expenditure items like pension contributions, which totaled $8.0 billion. These costs, alongside debt service and health insurance, continue to outpace revenue growth, necessitating temporary budget fixes that fail to address long-term fiscal challenges.
Key Data
$8.0 billion
— The annual cost of pension contributions, which is one of the city's large, growing expenditure items that cannot be reduced unilaterally by the Mayor.
The Port Authority of New York and New Jersey police force participates in the New York State and Local Police and Fire Retirement System, where most current officers are eligible to retire after 20 years of service with a pension equal to 50 percent of their average earnings in their three highest-paid years. Comparative analysis shows that the PANYNJ's illustrative pension benefit of $59,856 is higher than that of several other regional departments, though lower than the $63,258 benefit for Nassau County officers.
Key Data
$59,856
— Illustrative pension benefit for PANYNJ officers retiring after 25 years of service.
$63,258
— Illustrative pension benefit for Nassau County officers retiring after 25 years of service.
$58,013
— Illustrative pension benefit for New York City Tier 2 officers retiring after 25 years of service.
$45,490
— Illustrative pension benefit for New Jersey State Troopers retiring after 25 years of service.
50%
— Benefit multiplier for calculating the share of final average salary paid in pensions for most systems.
20 years
— Minimum years of service required for PANYNJ officers to be eligible for a pension.
New York's public education system faces high costs due to unusually generous employee fringe benefits, including pensions and health insurance, which consume a significantly larger portion of per-pupil spending than the national average. While the state has made progress in reforming teacher pension benefits, further fiscal efficiency could be achieved by addressing health insurance premium-sharing arrangements and restructuring state aid formulas.
Key Data
20 percent
— Statewide, districts spend 20 percent on fringe benefits, including pensions and health insurance, compared to a U.S. average of 13 percent.
$3,688
— The per student amount spent on fringe benefits is nearly three times the U.S. average, at $3,688 per pupil versus $1,330.
169 percent
— In the last 10 years, New York's growth in spending per pupil on instructional staff fringe benefits increased 169 percent compared to a national average of 100 percent.
New York State legislators have continued to impose fiscal burdens on local governments by passing pension sweeteners that increase costs, despite the ongoing financial strain on localities. These legislative actions exacerbate the fiscal pressure on local governments, which are already struggling to manage their budgets within their means.
Key Data
75%
— The disability benefit rate for eligible police and firefighters who contract a specific type of staph infection, which is now presumed to be job-related.
The proposed amortization plan for New York State's pension contributions creates significant long-term costs by deferring payments for short-term budget relief. This approach, which adds approximately $1 billion in interest expenses for the state, is fiscally imprudent and has been rejected by most eligible jurisdictions.
Recommendations related to Pensions
New York State and localities should avoid deferring pension fund contributions to prevent incurring far greater long-run costs.
Policymakers should reject the comptroller’s amortization plan because it is an expensive way to extend an already smoothed payment plan.
The state should prioritize long-term fiscal prudence over taking short-run budget relief that increases future costs.
Key Data
$1 billion
— total added interest expense for the state alone resulting from the comptroller’s amortization plan
The Tier VI pension proposal maintains existing retirement eligibility for police and firefighters, allowing them to retire with full benefits after 20 or 22 years of service regardless of age. While the proposal increases the age for claiming partial pension benefits from 62 to 65 for those leaving service early, it does not force uniformed personnel to work until age 65.
Key Data
22
— Years of service required for newly hired New York City Police Officers and Firefighters to be eligible to retire.
20
— Years of service required for future State and local members of the New York State Police and Fire Retirement System to retire with no minimum age.
62 to 65
— The age increase for members who leave for reasons other than retirement or death to claim a partial pension benefit.
12
— Number of states that made changes to retirement benefits for uniformed personnel between 2010 and 2011.
Governor Cuomo's Tier VI proposal aims to align New York's public sector pension contributions with national norms by increasing employee rates to between 4 and 6 percent and implementing a risk-sharing mechanism. This reform would shift a portion of the financial burden from taxpayers to employees, addressing the state's unusually high employer-to-employee contribution ratio.
Recommendations related to Pensions
The state should adopt the Tier VI proposal to increase contributions from new employees to the pension funds of New York’s state and local governments.
Policymakers should implement the innovative “risk-reward” approach contained in the Governor’s proposal to share market performance risk with 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 taxpayers.
Key Data
78 percent
— In 2009, 78 percent of state and local pension plans required employee contributions greater than 3.9 percent.
$97.7 billion
— In 2010, total employer and employee contributions to state-run public pension funds were $97.7 billion.
89 percent
— New York State and its local government entities made 89 percent of total contributions to state-run systems, while employees made just 11 percent.
$8.3 billion
— The amount contributed to New York’s local pension plans was $8.3 billion, nearly one-third of the national total in 2009.
7:1
— New York’s ratio of employer to employee contributions for local systems is 7:1, compared to a national average of 4:1.
Transit workers currently receive a defined-benefit pension plan that is more generous than those offered to new state and city employees, with members contributing only 3 percent of their salaries toward the cost. While private sector employees rarely have access to such plans, the proposed "Tier VI" reforms aim to align transit worker benefits with broader public sector standards by increasing the retirement age and mandatory contributions.
Recommendations related to Pensions
The MTA should adopt the "Tier VI" proposal, which includes increasing the vesting period to 12 years for new employees.
The MTA should adopt the "Tier VI" proposal, which includes increasing the retirement age to 65 for new employees.
The MTA should adopt the "Tier VI" proposal, which includes increasing mandatory pension contributions for new employees.
The MTA should adopt the "Tier VI" proposal, which includes changing overtime pay to non-pensionable status for new employees.
Key Data
3%
— The percentage of their salaries that TWU members contribute annually toward the cost of their pensions.
20%
— The percentage of employees in the private sector who have access to a defined benefit pension plan.
50%
— The percentage of final average salary that employees with 25 years of service receive under the most common retirement plan.
Governor Cuomo's proposed "Tier VI" pension plan introduces an optional 401(k)-style defined contribution option for new public employees, where employers would contribute 4% of salary and match up to 3% for a maximum of 7%. This proposal aligns with private sector trends where defined benefit plan participation dropped from 76% in 1986 to 24% in 2008, while defined contribution plans have become the standard.
Key Data
76%
— Share of full-time workers in private industry participating in defined benefit pension plans in 1986.
24%
— Share of full-time workers in private industry participating in defined benefit pension plans in 2008.
58%
— Percentage of private sector employees with access to defined contribution plans in 2011.
30%
— Percentage of state and local government employees with access to a defined contribution plan.
4%
— Proposed employer contribution rate for the optional defined contribution plan under the Tier VI proposal.
7%
— Maximum employer contribution rate for the optional defined contribution plan under the Tier VI proposal.
New York's public pension systems rely heavily on state funding, with employee contributions accounting for only 11.5% of combined contributions compared to the 33% national average. To address this disparity, the state should adopt the Governor's modernization proposal, which introduces a risk/reward mechanism and increases employee contributions to between 3% and 6% based on salary.
Recommendations related to Pensions
The Governor's proposal to modernize the system should be enacted, which 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 pension reform proposal should include 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 to pension systems.
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 pension costs are among the highest in the nation, driving up tax burdens and threatening the funding of vital public services. Proposed reforms, including raising the retirement age and introducing a 401(k)-style option, aim to modernize benefits for future employees and save taxpayers an estimated $123 billion over the next 30 years.
Recommendations related to Pensions
Future employees who opt for the traditional defined benefit plan should contribute between 3% and 6% of their paychecks toward their pensions, depending on their income.
The retirement age should rise from 62 to 65 to be consistent with national trends.
Overtime should be barred from pension calculations as it is 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 as an alternative to traditional pensions.
Employees should be able to have up to 10% of their salary deposited in a retirement account if they opt for the full matching program.
Key Data
$574
— Amount New Yorkers pay per person per year in taxes for public employee pensions, which is more than twice the national average.
$123 billion
— Estimated savings for taxpayers throughout New York State over the next 30 years resulting from the proposed pension changes.
$8.6 billion
— Projected cost of New York City's pension obligations by FY 2014, up from $2.4 billion in FY 2004.
30%
— Percentage of MTA payroll that pension costs will total by FY 2014 without reform.
19%
— Percentage of MTA fare and toll revenue that pension costs will consume by FY 2014 without reform.
14%
— Average annual growth rate of New York City's pension costs.
New York's public pension costs are significantly higher than the national average, with state and local obligations projected to reach billions of dollars by fiscal year 2014. Implementing a new package of pension benefits for new employees could save the state and local governments $123 billion over the next 30 years.
Recommendations related to Pensions
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.
The Legislature should swiftly adopt a pension reform proposal.
New York should implement a new package of pension benefits for new employees to bring the state more closely in line with national norms.
Key Data
$123 billion
— Savings over the next 30 years from a new package of pension benefits for new employees.
$8.6 billion
— New York City's expected pension costs by FY 2014.
$2 billion
— State government pension costs expected by FY 2014.
$1 billion
— MTA pension costs expected by FY 2014.
$574
— Annual tax per person in New York for public employee pensions.
$12
— Pension cost per $1,000 of personal income in New York.
New York's public employee pension costs have grown significantly, placing a competitive disadvantage on the state and crowding out funding for other government services. Implementing the proposed "Tier VI" pension reform, which includes higher employee contributions and a higher retirement age, is necessary to align the state with national norms and achieve substantial long-term savings.
Recommendations related to Pensions
Governor Andrew Cuomo should include the Tier VI pension reform plan in the Executive Budget, and the Legislature should adopt it in a timely manner.
New York State should add a well-designed Tier VI to pension plans to bring the state more closely in line with practices nationwide and help contain the future growth of pension costs.
The state could extend defined contribution plans to other groups of employees to provide more portable retirement benefits or serve as the foundation for a hybrid combination plan.
Key Data
$143
— New York’s state and local tax burden per $1,000 of personal income in fiscal year 2009.
4.1 percent
— The share of total state and local spending accounted for by employer contributions to pension funds in New York.
$1.5 billion
— The amount of State payments to pension funds in fiscal year 2011, which tripled from $455 million in fiscal year 2004.
$7.0 billion
— The amount of New York City's pension payments in fiscal year 2011, which grew from $2.4 billion in fiscal year 2004.
$93 billion
— The estimated savings for New York State and local governments over 30 years from the proposed Tier VI changes.
$30 billion
— The estimated savings for New York City pension systems over 30 years from the proposed Tier VI changes.
New York must address its structural budget deficit by implementing structural changes to major cost drivers, specifically by enacting a new pension tier for new hires. Additionally, the state should end fiscal gimmicks like the amortization of pension payments to avoid long-term interest costs and improve fiscal transparency.
Recommendations related to Pensions
The state should enact a new pension tier to address the fact that required contributions to pension funds have been the fastest-growing area of the state budget.
Policymakers should end the amortization of a $782 million payment to the pension system, as this fiscal gimmick masks the state's structural deficit and incurs long-term interest costs.
Key Data
8 percent
— Average annual increase in state pension contributions and other fringe benefits over the past decade.
$120 billion
— Estimated savings over 30 years from the proposed new pension tier for new hires.
$782 million
— Amount of the pension system payment that is being amortized, a practice that should be ended.
New York State faces a projected $3.2 billion budget gap that requires structural reforms to address rising costs in areas like pensions, Medicaid, and school aid. Rather than relying on new taxes or fiscal gimmicks like pension payment amortization, the state should focus on containing spending growth to achieve a sustainable budget.
Recommendations related to Pensions
The state should close the remaining budget gap with structural reform measures that slow down the fastest cost drivers, specifically pensions, school aid and Medicaid.
The state should implement the Governor's proposed pension tier for new hires that increases the retirement age and vesting period and reduces pension spiking from overtime.
The state should end the amortization of a $782 million payment to the pension system while addressing the underlying cost drivers.
Key Data
8%
— Average annual increase in state pension contributions and other fringe benefits over the past decade.
$120 billion
— Projected savings over 30 years from the Governor's proposed pension tier for new hires.
$782 million
— Amount of the payment to the pension system that the state plans to amortize as a fiscal gimmick.
The state's recent tax agreement, while increasing reliance on high earners, offers a path toward fiscal responsibility if paired with long-term expenditure controls. A critical component of this strategy is the adoption of the Governor's "Tier 6" pension reform proposal, which aims to generate over $120 billion in savings over the next three decades through structural changes to retirement benefits and contributions.
Recommendations related to Pensions
New York should implement the Governor’s “Tier 6” proposal to reform the state and local pension system.
The state should adopt the Governor's "Tier 6" proposal, which calls for an increased retirement age for public employees.
The state should adopt the Governor's "Tier 6" proposal, which calls for more reasonable ways of calculating benefits for public employees.
The state should adopt the Governor's "Tier 6" proposal, which calls for higher employee contributions to the pension system.
Key Data
$120 billion
— Projected savings over the next 30 years from implementing the Governor's "Tier 6" pension reform proposal.
The New York State budget relies on fiscal gimmicks, including the amortization of a $635 million payment to the pension system, to avoid spending reductions. Any unexpected revenue should be used to address these existing fiscal issues rather than funding new initiatives.
Key Data
$635 Million
— The amount of the payment to the pension system that was amortized as a fiscal gimmick in the current-year budget.
The proposed legislation allowing school districts to borrow funds to cover pension contributions should be vetoed to prevent the undermining of the property tax cap and the shifting of costs to future students. Instead, the state should pursue sustainable, long-term reforms to pension benefits rather than relying on short-term borrowing measures.
Recommendations related to Pensions
The Governor should veto A6309/S4067, which would allow school districts to borrow funds 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 the proposed bill would allow school districts to borrow.
15 years
— Repayment period for the proposed school district pension borrowing.
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 an increasing share of total revenues. To avoid future service cuts and layoffs, the City must implement structural reforms to these major expenses, including adopting the Governor's proposed pension reform bill.
Recommendations related to Pensions
The City Council should join the Mayor in backing the pension reform bill that has been introduced by the Governor.
The City should increase vesting to 12 years, raise the retirement age to 65, require greater contributions from employees, and eliminate overtime from the final salary calculation for future employees.
Key Data
$30 billion
— Projected savings over the next 30 years from the proposed pension reform bill.
$11 billion
— Total spending on health insurance, pension contributions, and debt service in 2005.
$23.1 billion
— Projected spending on health insurance, pension contributions, and debt service in 2015.
Voting against a bill that would have allowed school districts to borrow money to cover pension contributions over 15 years prevents the obscuring of the true cost of benefits and protects long-term fiscal stability. This borrowing scheme would have shifted current service costs onto future taxpayers and undermined the effectiveness of the state's property tax cap.
Recommendations related to Pensions
School districts should avoid financing a portion of their required pension contributions by borrowing and paying it back over 15 years, as this would damage the long-term fiscal health of participating school districts.
Policymakers should reject legislation that allows borrowing for pension contributions, as it pushes the cost of current services to future years and taxpayers.
Policymakers should avoid measures that mask the true cost of retiree benefits, as this impedes serious efforts toward pension reform.
Legislators should uphold the integrity of the property tax cap by rejecting legislation that contradicts and undermines its purpose.
Key Data
15 years
— The repayment period for the proposed borrowing of required pension contributions by school districts.
New York State must prioritize serious pension reform to ensure fiscal stability, while avoiding dangerous practices like allowing school districts to borrow to fund pension payments. Additionally, the state needs to secure over $1 billion in unspecified budget savings to prevent a mid-year deficit.
Recommendations related to Pensions
The bill giving school districts the right to borrow to fund pension payments should be destined for a prompt veto.
Serious pension reform, important to the fiscal stability of New York City as well as the state, should become a top priority.
Key Data
$1 billion
— The amount of unspecified savings in the adopted budget that must be achieved to avoid a serious mid-year budget deficit.
New York's pension system faces significant fiscal pressure, with costs in New York City quadrupling to $7 billion since 2002 and projected to reach $8.7 billion by 2015. Proposed reforms aim to create a more sustainable system by increasing the retirement age to 65, raising employee contributions, and eliminating practices like "pension padding" that inflate benefit calculations.
Recommendations related to Pensions
The state should increase the retirement age to 65 to align with Medicare eligibility and reduce the length and cost of benefit payouts.
The plan would require a 6 percent contribution from all employees for their entire length of service to bring New York closer to national norms.
Policymakers should calculate pension benefits based on the highest five years of earnings rather than the highest three to eliminate "pension padding."
The state should cap maximum eligible wages at $179,000 for the purpose of calculating pension benefits.
The proposal would exclude overtime pay from the earnings used to calculate benefits to bring New York's rules in line with 94 percent of other public employees nationwide.
Key Data
$1.5 billion to $7 billion
— The growth in New York City pension costs since 2002.
$8.7 billion
— The projected cost of New York City pension contributions 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.
$179,000
— The proposed cap on maximum eligible wages for calculating pension benefits.
6 percent
— The proposed required contribution rate for all employees for their entire length of service.
New York state's recent budget agreement successfully reduces reliance on deficit borrowing and one-time gimmicks, though it relies on uncertain savings from future negotiations with public employee unions and unspecified agency efficiencies. To ensure long-term fiscal stability, policymakers should establish a new pension tier for public employees that increases the retirement age, raises employee contributions, and excludes overtime from pensionable salary calculations.
Recommendations related to Pensions
A new pension tier should be created for all state and local public employees that raises the retirement age, increases employee contributions and ends the inclusion of overtime in pensionable salary.
New York City faces a massive $70 billion unfunded liability for retiree health benefits, which are currently paid on a pay-as-you-go basis rather than being actuarially funded like pensions. To avoid depleting the retiree health insurance trust fund for short-term budget relief, the City should eliminate Medicare Part B premium reimbursements and implement premium sharing for retirees.
Recommendations related to Pensions
The trust fund should be protected from any further drawdowns, including the ones already scheduled for the current and subsequent fiscal years.
The City should eliminate reimbursement of Medicare Part B premiums.
The City should pursue more general reform of retiree health insurance by increasing vesting requirements and instituting premium sharing.
Key Data
$70 billion
— The unfunded accrued liability for retiree health benefits.
$1.5 billion
— The cost of retiree health insurance in the current year.
$2.2 billion
— The projected cost of retiree health insurance by 2015.
$240 million
— Savings generated in the current year by eliminating Medicare Part B premium reimbursement.
$620 million
— Savings in the current year if retirees paid for half the cost of their premiums.
$870 million
— Savings by 2014 if retirees paid for half the cost of their premiums.
New York City's budget has faced significant cuts since the 2008 recession, yet the 'All Other' category—which includes pension fund contributions and health insurance premiums—has remained largely untouched. To avoid further reductions to essential agency services, the City must pursue reforms to these fringe benefits, including seeking state authorization for changes to future pension benefits.
Recommendations related to Pensions
The City must identify and approve ways to reduce spending for pension fund contributions and health insurance premiums for employees and retirees to avoid substantial new cuts in agency budgets.
The City should pursue new initiatives to reduce the “all other” budget category, which consists largely of pension fund contributions and health insurance premiums.
Wide support must be garnered to push the State Legislature to authorize changes in future pension benefits to achieve significant savings.
Key Data
$18 billion
— Planned budget for the 'All Other' category in fiscal year 2009, which includes pension fund contributions, debt service, and other fringe benefits.
39 percent
— Share of the City’s total City-funded spending comprised by the 'All Other' category, which includes pension fund contributions.
$116 million
— Amount by which the 'All Other' category, including pension fund contributions, has been cut despite its substantial share of total spending.
Local governments face significant fiscal pressure, with labor costs accounting for 70% of local budgets. To address these challenges, localities must implement reforms to pensions and compensation, similar to the proactive agenda proposed by Mayor Michael Bloomberg.
Recommendations related to Pensions
Localities need to make changes in pensions and compensation to address the fact that 70% of local budget expenses are for labor.
The governor should support Mayor Michael Bloomberg's proactive agenda regarding pensions and compensation for the city.
Key Data
70%
— Percentage of expenses in any local budget that are for labor.
Public employee retirement benefits in New York have become a rapidly growing expense, with annual state pension contributions rising from $100 million to nearly $1.5 billion in a decade. The state also faces significant unfunded liabilities for retiree health benefits, totaling $56 billion, while pension calculations often include overtime and allow for early retirement.
Key Data
$1.5 billion
— Annual pension contributions paid by New York state today, compared to $100 million ten years ago.
$56 billion
— Unfunded liability for state retiree health benefits.
$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.
8:1
— Ratio of employer to employee contributions to pension funds, compared to the U.S. average of 2:1.
44 percent
— Share of retirees under age 60 in 2009.
New York City's expenses for retiree health insurance, known as other postemployment benefits (OPEB), surged to $9.4 billion in fiscal year 2010, driven by new federal and state mandates and the structure of public safety pension plans. To manage these growing liabilities, the City should implement premium-sharing for retirees and establish a disciplined funding policy for the Retiree Health Benefits Trust rather than using it to cover pension cost increases.
Recommendations related to Pensions
The City should require greater retiree contributions toward health insurance premiums.
The City should establish a program for funding the future liabilities.
The City should institute premium-sharing for retirees, with an appropriate goal for retirees to pay 50% of their premiums.
The Mayor and the City Council should agree to a policy that determines the basis for future contributions and limits the conditions and purposes of future withdrawals from the Retiree Health Benefits Trust.
Key Data
$9.4 billion
— New York City recognized expense for other postemployment benefits (OPEB) in fiscal year 2010.
$11 billion
— Actuarially determined contribution needed for the City to fully fund its 2010 OPEB obligation.
$2.4 billion
— Projected City premium payments for retiree health insurance by 2014.
$2.5 billion
— Total amount deposited into the Retiree Health Benefits Trust (RHBT) fund over fiscal years 2006 and 2007.
$1.6 billion
— Total premium payments made by the City in fiscal year 2010.
$2.3 billion
— OPEB expense incurred by New York City in fiscal year 2009.
Rising pension costs for city workers are forcing significant budget cuts to youth services and other city agencies. To address this, the state should implement a new pension system for future uniformed workers that includes a minimum retirement age and higher employee contributions, while also increasing cost-sharing for retiree health benefits.
Recommendations related to Pensions
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 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
$69,884
— Annual city-funded pension fund contributions for each firefighter.
$51,829
— Annual city-funded pension fund contributions for each police officer.
$6.6 billion
— Total pension contributions cost New York's taxpayers last year.
$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 significant financial strain due to rising employer contributions, which now account for 88 percent of total funding, and the inclusion of overtime in final salary calculations. Additionally, the state faces massive unfunded liabilities for retiree health insurance, with total obligations estimated at over $200 billion.
Key Data
$55.9 billion
— The State liability for retiree health insurance and other benefits.
88%
— The share of total pension contributions provided by State and local employers in 2009.
$33,270
— The average annual pension received by employees retiring in 2010.
$1.5 billion
— The annual cost of pension contributions to the State.
$2.1 billion
— The projected cost of State pension fund contributions by fiscal year 2014.
$200 billion
— The estimated total State and local unfunded actuarial liabilities for retiree health benefits.
The fiscal year 2010-11 budget includes a provision to under-fund state and local pension systems for up to six years by capping required contributions. This policy masks the true long-term costs to taxpayers and threatens the financial soundness of the pension funds.
Legislation advancing dozens of benefit enhancements for state and local employees threatens to further strain an already unaffordable pension system. The Governor is urged to veto these measures, which include provisions like increasing salary calculations for teachers and allowing corrections officers to defer vacation days for lump sum payments.
Recommendations related to Pensions
The Governor should veto the bills that would enhance benefits for state and local employees and retirees.
The Governor should veto any other bills that come before him that would add costs to the 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 New York City teachers resulting from bill A8664-A/S5748A.
5
— Number of vacation days per year that members of the State Department of Corrections would be allowed to defer under bill A8509A/S5633A.
New York City's fiscal year 2011 budget relies on exhausted surplus funds to cover expenditures, necessitating a shift toward addressing unsustainable growth in fringe benefits and debt service. Implementing reforms to public employee retirement benefits, such as creating a new pension tier with increased employee contributions and longer vesting periods, could generate significant annual savings.
Recommendations related to Pensions
The City should create a new pension tier that requires greater employee contributions and a longer vesting period to save $200 million annually.
The City should take a stronger stance on reforming retirement benefits for its workers to bring them more in line with the private sector.
Key Data
$200 million
— Estimated annual savings from creating a new pension tier with greater employee contributions and a longer vesting period.
5%
— Average annual growth rate of city employee pension and fringe benefits during the plan years.
New York State's proposal to defer pension contributions to achieve short-term budget relief will ultimately cost $5.8 billion, exceeding the $4.5 billion in projected savings. Furthermore, the state continues to increase long-term liabilities by adding benefit sweeteners to public employee packages while simultaneously attempting to reduce current funding obligations.
Recommendations related to Pensions
State leaders should avoid the slippery slope of stretching out pension payments, which provides short-term budgetary relief but creates high long-term costs.
Efforts to please labor unions with pension and health insurance benefit sweeteners should be foresworn.
State and local governments should develop more aggressive plans to provide permanent, long-run savings rather than pushing costs onto future taxpayers.
Key Data
$1.7 billion
— Taxpayer contribution required to support New York State employee pensions in fiscal year 2010-11.
$3.2 billion
— Taxpayer contribution required to support New York State employee pensions in fiscal year 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 the amortization plan will cost the State pension funds in fewer total assets by fiscal year 2025-26.
9.5 percent
— Proposed cap on pension contributions for the New York State and Local Employees Retirement System in fiscal year 2010-11.
Pension costs have surged 815 percent between fiscal years 2000 and 2009, now consuming 15 percent of all City revenues. To address this growth, the City Council is urged to implement a new pension tier for future employees that requires higher contributions and longer vesting periods.
Recommendations related to Pensions
The Council should support reforming the pension package for new employees—commonly referred to as a new tier—to require greater employee contributions and a longer vesting period.
The Council should lobby the State Legislature for pension reform to help address the long-term fiscal challenges facing the City.
Key Data
815 percent
— The rate at which pension costs grew between fiscal years 2000 and 2009.
15 percent
— The portion of all City revenues that pension costs currently consume.
$6.8 billion
— The current annual cost of pensions for the City.
$8.1 billion
— The projected annual cost of pensions by fiscal year 2014.
21 percent
— The projected increase in pension costs by fiscal year 2014.
New York City and State retirement benefits for public employees are significantly more generous than those provided by other large public and private employers, creating a growing fiscal burden. The report recommends shifting to defined contribution plans for new hires and implementing specific reforms to pension and health insurance structures to ensure long-term fiscal sustainability.
Recommendations related to Pensions
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 final average salary (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 City and State should eliminate the variable supplements available to some retired New York City uniformed workers.
The City and State should seek to place all new workers in defined contribution plans.
Key Data
$615 million
— City pension contributions in fiscal year 2000.
$2.3 billion
— City pension contributions in fiscal year 2004.
$4.7 billion
— Projected City pension contributions in fiscal year 2008.
$218 million
— State pension contributions in 2000.
$592 million
— State pension contributions in 2004.
$1.4 billion
— Projected State pension contributions in 2008.
New York State faces rapidly rising pension and health insurance costs, with pension expenses projected to grow by 184 percent over the financial plan period. To address these unsustainable trends and the state's significant budget gap, the state should introduce a defined contribution pension option and avoid borrowing schemes that push costs into the future.
Recommendations related to Pensions
A defined contribution option should be added to the pension system for all State employees.
The State should not start a pension borrowing scheme as proposed in the Executive Budget.
The State should move away from a system where its downside risk for contributions can range from 5 to 11 to 33 percent of salary while the employee's is fixed at 3 percent.
Key Data
184 percent
— Projected growth in pension costs over the financial plan period.
23.5 percent
— Required pension contribution as a share of salary for civilian state and local employees in fiscal year 2013-14.
$45 billion
— Total payments required to compensate for assets lost from the stock market decline combined with benefit enrichments.
$33,733
— Projected average state pension contribution for uniformed employees in fiscal year 2013-14.
3 percent
— Required pension contribution rate for newly hired Tier V members.
New York City faces significant budget pressures, but establishing a new pension tier for future employees could generate substantial savings to prevent teacher layoffs. These rising costs are driven by generous benefits, including formulas that incorporate overtime and a lack of age requirements for uniformed retirees.
Recommendations related to Pensions
The city should create a new pension tier for future workers that offers a more affordable package to yield enough savings to avoid laying off 2,000 teachers.
Key Data
$200 million
— Initial annual savings from creating a new pension tier.
$7.1 billion
— Amount the city will have to contribute to the pension funds of city workers next year.
$2,300
— Equivalent cost of city pension fund contributions for each household in the city.
The financial plan seeks to address budget gaps by negotiating new union contracts that secure long-term savings through structural changes to pension and health insurance benefits. While the plan avoids broad tax increases, it relies on optimistic revenue projections and draws down funds from the Retiree Health Benefits Trust, a practice that warrants reconsideration to ensure fiscal prudence.
Recommendations related to Pensions
The City should strike a new bargain with public employee unions that both saves money in the short run and secures longer run commitments on pension and health insurance items that yield sizable savings in the future.
The City should adopt a policy for the future use of the Retiree Health Benefits Trust that links withdrawals to growth in the current year liability for retiree health insurance premiums.
Key Data
$200 million
— Annual savings from changes in pension benefits for future workers.
$357 million
— Savings starting next year from changes to the employee and retiree health insurance program.
$2.5 billion
— Total funds deposited into the Retiree Health Benefits Trust during the fiscal years 2006 and 2007.
$1,149 million
— Amount scheduled to be withdrawn from the Retiree Health Benefits Trust to balance operating budgets between fiscal years 2010 and 2012.
Thousands of retired police and firefighters receive annual $12,000 Christmas bonuses through the Variable Supplement Fund (VSF), which are paid in addition to their regular pension checks. In fiscal year 2010, these VSF payments totaled $405 million, a significant increase from the $164 million paid in fiscal year 2001.
Key Data
$12,000
— Annual Christmas bonus payment received by retired police and firefighters through the Variable Supplement Fund.
$405 million
— Total benefits paid from Variable Supplement Funds in fiscal year 2010.
$164 million
— Total benefits paid from Variable Supplement Funds in fiscal year 2001.
$1.7 billion
— Total assets held by Variable Supplement Funds in fiscal year 2010.
Municipal employee benefits, including pensions and health insurance, cost taxpayers $10.4 billion annually, a figure that is significantly higher than private-sector standards. Aligning these benefits with private-market practices, such as requiring employee contributions and shifting to defined-contribution pension plans for future hires, could yield substantial annual savings.
Recommendations related to Pensions
The city should require current workers to make contributions toward health-insurance premiums equal to the amounts paid by employees of local private-sector firms to reduce taxpayer costs by $628 million a year.
The city should require retirees to contribute toward health-insurance premiums to achieve additional annual savings of $741 million.
The city should convert to defined-contribution plans for future hires to remain competitive with the private sector.
Key Data
$10.4 billion
— Total cost for pension and health-insurance benefits for current and retired municipal employees this fiscal year.
$1.4 billion
— Potential annual savings if the city offered benefits similar to those in the private sector.
$6.7 billion
— Contributions to pension funds on behalf of current workers.
$2.5 billion
— Payments for the health insurance of current employees.
$1.2 billion
— Payments for the health insurance of retirees.
8 percent
— Percentage of private firms in the survey that do not require payments toward premiums from their workers.
To maintain fiscal stability, the city must address the rising costs of municipal payroll and debt by reforming generous fringe benefits and increasing the retirement age for new employees. These measures aim to reverse the trend of skyrocketing compensation costs, which grew by 80% between 2000 and 2009.
Recommendations related to Pensions
The retirement age should be increased for new employees, and they should contribute more to their pensions.
Key Data
$15 billon
— The increase in the cost of compensating City employees, including pension and fringe benefits, from fiscal year 2000 to 2009.
80%
— The percentage increase in the cost of compensating City employees, including pension and fringe benefits, from fiscal year 2000 to 2009.
New York City's upcoming teachers' contract negotiations present an opportunity to address rising costs by implementing pension and health insurance reforms, including increased employee contributions and a higher minimum retirement age. These changes are necessary to manage the city's significant budget gap while ensuring the long-term sustainability of teacher compensation packages.
Recommendations related to Pensions
Pension and health insurance reforms should be implemented, including increased employee contributions to their pension fund.
The City and the UFT should redouble their efforts to have the measure to change pension benefits for newly hired teachers introduced and approved by the Legislature.
The Mayor should seek UFT support for further legislative reforms of pension benefits, including a higher minimum retirement age.
At a minimum, no pay increases should become effective until the prior pension agreement is enacted into law.
Key Data
265 percent
— The increase in the City’s required pension contributions between fiscal years 2003 and 2009.
$100 million
— The projected annual savings for the next 20 years from the agreed-upon pension benefit changes for newly hired teachers.
4.85 percent
— The required employee contribution to their pension fund for the entire length of service under the June 2009 agreement.
New York faces a potential $3 billion budget gap, necessitating immediate reforms to state spending and public employee benefits. The state should address the growing pension crisis by adopting a more affordable, comprehensive benefit package for all new public employees, including police and firefighters.
Recommendations related to Pensions
The Legislature should immediately adopt the less costly but still comprehensive package of pension benefits for future employees to provide fiscal relief.
The new pension package should apply to civilian employees, police, and firefighters alike.
New York State faces skyrocketing public employee pension costs, with projections indicating a 60 percent increase in annual employer contributions by 2011. To address this funding crisis without borrowing from the future, the state should maintain full funding requirements, curb benefit enrichment, and establish a new, less costly pension tier.
Recommendations related to Pensions
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 public employer contributions required to fully meet pension obligations starting in 2011.
New York City faces a significant fiscal challenge, with the current financial plan requiring a $1.1 billion drawdown from the Retiree Health Insurance Trust Fund to address rising pension fund contributions caused by investment losses. To ensure long-term fiscal stability, the city must urgently implement the proposed fifth tier in the pension system and pursue broader structural reforms.
Recommendations related to Pensions
The Mayor’s proposal for a fifth tier in the pension system is urgently needed.
The City should implement pension reforms to achieve long-run savings.
Key Data
$1.1 billion
— Drawdown from the Retiree Health Insurance Trust Fund over three years to cover the cost of additional pension fund contributions stemming from investment losses.
Extending Tier II pension provisions to new police and firefighters would undermine efforts to control rising retirement costs by exempting these employees from the more sustainable Tier V requirements. Uniformed employees currently receive significantly more generous benefits than civilian counterparts, with employers contributing 20% of salary toward their pensions compared to 11% for civilians.
Recommendations related to Pensions
The Governor should veto A3426/S1409, which would extend Tier II provisions to 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%
— of uniformed employees who retired from the New York State Police and Fire Retirement System were under the age of 60.
$48,900 to $66,586
— the annual range of lifetime pension payments for retired uniformed employees.
20%
— of salary that public employers are expected to contribute to fund the pension of a uniformed employee.
11%
— of salary that public employers are expected to contribute to fund the pension of a civilian employee.
The fiscal year 2009-10 budget failed to secure concessions from public employee unions, including a proposal to create a new, less generous pension tier for future hires. This rejected measure, alongside other benefit adjustments, was projected to save $209 million in the 2009-10 fiscal year.
Key Data
$209 million
— Projected savings in fiscal year 2009-10 from the Governor's proposed pension system changes and benefit adjustments.
This 2009 report examines the rising costs of retirement benefits for New York City employees. The document serves as an overview of ten key factors regarding the financial implications of these pension obligations.
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 should implement a less expensive pension tier for future hires, require retiree contributions to health premiums, and eliminate supplemental "Christmas bonuses" for police and firefighters.
Recommendations related to Pensions
The city should create a new "tier" for future workers that would provide less costly pension benefits.
The city should seek employee contributions to health premiums, a concept that should also be applied 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 the annual cost of funding pensions has grown since fiscal year 2003.
$10.2 billion
— The amount paid in benefits to New York City's retirees annually.
$12,000
— The supplemental retirement benefit, or "Christmas bonus," paid yearly to police officers and firefighters who retire with 20 or more years of service.
$1.9 billion
— The projected cost of health care for retirees in fiscal year 2013.
$5.7 billion
— The amount of city pension-fund contributions in fiscal year 2008.
$7.6 billion
— The projected amount of city pension-fund contributions by fiscal year 2013.
New York should implement a new pension tier for public employees to address the system's excessive generosity and rising costs caused by past pension sweeteners. This reform is necessary to provide relief to local officials facing high taxes and to ensure long-term fiscal sustainability.
Recommendations related to Pensions
The state should adopt a new pension tier and other compensation changes for public employees, as the current system is overly generous by public sector standards and becomes increasingly expensive due to the accumulation of pension sweeteners.
Key Data
3%
— The amount of the final year contract increase that should be eliminated as a reasonable concession from organized labor.
New York State is facing significant fiscal pressure, prompting proposals to reform public employee compensation by increasing the minimum retirement age from 55 to 62 and excluding overtime pay from pension calculations. These measures, which also include extending mandatory employee contributions and reducing benefits for those with less than 30 years of service, aim to generate substantial long-term savings for the state.
Recommendations related to Pensions
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.
The state should reduce benefits for workers with less than 30 years of service.
Key Data
$250 million
— Short-term savings in fiscal year 2010-11 from the proposed pension measures.
$25 million to $500 million
— Projected annual savings growth for the new pension plan.
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 to the pension system.
New York City's average employee compensation costs have surged by nearly two-thirds over the last eight years, driven largely by an astonishing 704 percent increase in pension contributions. To address this fiscal strain, state legislators must approve proposed pension reforms that establish a new tier for incoming employees.
Recommendations related to Pensions
The Legislature should approve the proposed new pension tier for new employees to limit the growth of future liabilities.
Key Data
704%
— Growth in the city's average contribution for pension benefits over eight years.
$2,530
— The city's average contribution for pension benefits per full-time employee eight years ago.
$20,333
— The city's current average contribution for pension benefits per full-time employee.
$20,000
— The portion of fringe benefit costs attributed to pension contributions.
Between fiscal years 2000 and 2008, the average compensation cost for New York City full-time employees grew by 63 percent, largely driven by a 700 percent increase in pension contributions. While average pay grew by 33 percent, the surge in fringe benefit costs, particularly for pensions, significantly outpaced inflation and compensation growth seen in other sectors.
Key Data
$20,333
— The City's average contribution for pension benefits per full-time employee in fiscal year 2008.
$2,530
— The City's average contribution for pension benefits per full-time employee in fiscal year 2000.
700 percent
— The growth in the City's average contribution for pension benefits between fiscal years 2000 and 2008.
29.8 percent
— The average annual change in pension contributions between fiscal years 2000 and 2008.
New York State can achieve significant fiscal savings by reforming compensation for government workers, specifically by establishing a new pension tier for future employees. This structural change would help align public sector retirement benefits with private sector standards and generate $216 million in annual savings.
Recommendations related to Pensions
The state should pursue the creation of a new 'tier' for future employees to reform pension benefits and eventually save $216 million annually.
Key Data
$216 million
— Annual savings projected from the creation of a new pension tier for future state employees.
In order to promote fiscal reform, the Citizens Budget Commission (CBC) convened three separate agenda-setting conferences for key stakeholders in the state budget process in 2007. Each session focused on one aspect of fiscal reform with a goal of identifying specific changes for the coming budget cycle. The expectation is…
New York's public pension system should be reformed by either converting to a defined contribution model or making the existing defined benefit system more reasonable to align with current economic realities. Proposed changes include excluding overtime from benefit calculations, increasing retirement age requirements, and requiring larger employee contributions to the pension fund.
Recommendations related to Pensions
The most dramatic change would be to convert to a defined contribution rather than a defined benefit system.
Less far reaching would be changes in the current defined benefit system to make the benefits more reasonable.
For example, new workers could be given benefits that do not include overtime in the benefit calculations.
New workers could be subject to higher age requirements for retirement.
New workers could be required to make larger contributions to the pension fund.
Key Data
97 percent
— Growth in health insurance, pensions, social security and other benefits for teachers from school year 1995 to 2005.
29 percent
— Growth in salaries per teacher from school year 1995 to 2005.
$63,233
— Average salary per teacher in school year 1995.
$81,822
— Average salary per teacher in school year 2005.
New York's education finance system faces pressure to increase funding, with suggestions to address high instructional costs by reforming generous teacher pension and fringe benefits. Additionally, shifting certain local fiscal responsibilities, such as pension costs, to the state level could help alleviate the financial burden on local governments.
Recommendations related to Pensions
The State should consider assuming other local costs, such as that of pensions, as well.
Instructional costs, which are rooted in generous pension and fringe benefits for teachers, should be altered to provide substantial cost savings to the school system.
New York's state-mandated pension benefits for government workers are exceptionally generous, featuring low employee contributions, inclusion of overtime in benefit calculations, and low retirement ages that are no longer necessary for recruitment. These mandates, which are outside the scope of collective bargaining, contribute significantly to the high local tax burden by forcing local governments to fund benefits they do not control.
Recommendations related to Pensions
Redesign the State-mandated pension benefits for future state and local government workers by raising the minimum retirement ages.
Redesign the State-mandated pension benefits for future state and local government workers by increasing the required employee contributions.
Redesign the State-mandated pension benefits for future state and local government workers by eliminating the inclusion of overtime in benefit calculations.
Redesign the State-mandated pension benefits for future state and local government workers by eliminating variable supplements for uniformed workers.
Key Data
6%
— Percentage of full-time state and local government employees nationally who can count overtime in their pension formula.
74%
— Percentage of state and local government employees in other systems required to contribute more than 3% of their earnings.
$12,000
— Amount of 'variable supplements' or 'Christmas bonuses' per retiree in 2007 for uniformed workers in New York City.
New York City's pension system for municipal workers is significantly more generous than private-sector alternatives, with costs projected to exceed $5.7 billion by 2010. To address these spiraling expenses, the city should implement reforms such as increasing the retirement age, excluding overtime from benefit calculations, and requiring higher employee contributions for new hires.
Recommendations related to Pensions
New York should adopt the mayor's proposal to trim pension benefits for newly hired workers to address spiraling taxpayer costs.
The city should reform the pension benefit formula to exclude overtime earnings, which is a practice rare in other systems.
The city should increase the retirement age for city workers to better align with the age for full Social Security benefits.
The city should require city workers to contribute a larger share to the pension fund, as they currently contribute a small amount compared to others.
Key Data
$4 billion
— Taxpayers' contribution to pension funds in the current fiscal year.
$900 million
— Cost for retiree health insurance.
$5.7 billion
— Projected pension contributions in 2010.
15%
— Average hourly wage advantage for public employees over private-sector workers.
30%
— Wage advantage for blue-collar public employees over private-sector workers.
New York City's public sector retirement benefits are significantly more generous than those in the private sector, with costs for these benefits projected to increase by 59 percent to nearly $10 billion over four years. To address these rising expenses and align benefits with other large employers, the city should transition to defined contribution plans, increase employee contributions, and reform health insurance premium requirements.
Recommendations related to Pensions
The long-run goal of pension reform should be to convert from defined benefit to defined contribution plans.
The New York City systems should require a higher percentage employee contribution, and not limit it to ten years.
The New York system should raise the minimum age requirement for retirement to align with federal Social Security thresholds.
Pension benefits should be based on five years’ experience and should take into account only base salary, excluding overtime and other supplements.
Provisions for work-related disabilities should be revised to set more rigorous standards to prevent broad access without clear evidence of a work-related cause.
The City should eliminate the variable supplements available to some retired uniformed workers.
The City should require retirees to pay 50 percent of the premium for health insurance for themselves and their dependents.
The City should stop reimbursing retirees for Medicare Part B premiums to align with practices of other large employers.
Key Data
$3.2 billion
— The City's contribution to pension funds in fiscal year 2005.
$927 million
— The amount the City paid for health insurance for retirees in fiscal year 2005.
$12,000
— The amount of the variable supplement or "Christmas bonus" for some retired uniformed workers.
$325 million
— The amount the City would have saved in fiscal year 2004 if retirees were required to pay 50 percent of their health insurance premiums.
$131 million
— The amount the City would have saved in fiscal year 2004 if it stopped reimbursing retirees for Medicare Part B premiums.
43 percent
— The portion of all retired firefighters in 2002 classified as having a job-related disability.
New York's public employee retirement benefits are significantly more generous than those provided by private sector employers and other public systems, creating a rapidly growing fiscal burden for the City and State. To ensure long-term fiscal health, the report advocates for transitioning new hires to defined contribution plans and implementing structural reforms to existing benefits, including higher employee contributions and more rigorous eligibility standards.
Recommendations related to Pensions
The City and State should convert from defined benefit to defined contribution plans for all new workers.
The City and State should require retirees to pay 50 percent of the premium for health insurance for themselves and their dependents.
The City and State should stop reimbursing retirees for Medicare Part B premiums.
The New York systems should increase required employee contributions and not limit them to ten years.
The New York system should raise the minimum age requirement for retirement to adopt thresholds similar to the federal Social Security system.
Pension benefits should be based on a more standard definition of final average salary that excludes overtime and other supplements.
The current system should define work-related disabilities more rigorously to set more standard criteria.
The City should eliminate the variable supplements available to some retired New York City uniformed workers.
Key Data
$615 million
— City required contributions to pension funds in fiscal year 2000.
$2.3 billion
— City required contributions to pension funds in fiscal year 2004.
$4.7 billion
— Projected City required contributions to pension funds in fiscal year 2008.
$218 million
— State required pension fund contributions in 2000.
$592 million
— State required pension fund contributions in 2004.
$1.4 billion
— Projected State required pension fund contributions in 2008.
New York State's fiscal health is negatively impacted by high local government spending on employee pensions and fringe benefits, which contributes significantly to the state's tax burden. Legislative actions to enhance pension benefits have further increased these costs, with a substantial portion of recent added expenses stemming from these state-enacted changes.
Key Data
$771 million
— Amount of the $1.8 billion in added pension fund contribution expenses in fiscal year 2003-04 due to legislative enhancements.
43 percent
— Share of the $1.8 billion in added pension fund contribution expenses in fiscal year 2003-04 attributed to legislative enhancements.
$1.8 billion
— Total added pension fund contribution expenses in fiscal year 2003-04.
$7
— Amount of the $32 per $1,000 of personal income difference in local government spending between New York and the national average attributed to pensions and fringe benefits.
New York City's fiscal year 2004 budget gap was exacerbated by rising expenditures, including pension costs that exceeded expectations by $729 million. To help close this gap, the City utilized $229 million in savings by delaying payments to pension funds, a move that effectively functions as a loan requiring interest payments.
Key Data
$729 million
— The amount by which pension costs exceeded expectations in fiscal year 2004.
$229 million
— The fiscal year 2004 savings to the City resulting from the delay of payments to the City’s pension funds.
New York City has resorted to borrowing from municipal employee pension funds and deferring pension contributions to address budget gaps, creating future liabilities with added interest costs. To manage these fiscal challenges, the City must work with the State legislature to reform pension policies and control expenditures rather than relying on such short-term financial gimmicks.
Recommendations related to Pensions
The Mayor should work with the State legislature on pensions to help control the rate of growth in expenditures.
Current efforts to balance the budget should eschew borrowing from pension funds and other gimmicks, as these create large future costs that the next generation of New Yorkers would unfairly be forced to pay.
Key Data
$277 million
— Amount borrowed by the City in the current fiscal year from municipal employee pension funds to meet operating expenses.
$3.8 billion
— Annual cost for pension fund contributions and other fringe benefits that falls outside the Mayor's controllable base.
8 percent
— Added interest expense the City will incur by deferring pension contributions that otherwise would be due.
New York City's current defined benefit pension system creates fiscal risks and opportunities for abuse, such as inflating benefits through end-of-career overtime. To protect the city's financial stability, the system should be restructured for new hires into a defined contribution plan, while prohibiting benefit enhancements outside of the collective bargaining process for current employees.
Recommendations related to Pensions
The City should use the current round of collective bargaining to prohibit benefit enhancements for current employees outside of the collective bargaining process.
The City should establish a new defined contribution plan for newly hired workers to replace the current defined benefit system.
The City should end legislative initiatives for pension enhancements that are not agreed to as part of a contract and supported by the City.
The City should require that pension benefits be negotiated and set only in the context of collective bargaining.
The City should include serious and enforceable penalties in agreements to prevent unions from pursuing expensive legislative 'end-runs' around collective bargaining.
Key Data
$798 million
— Recurring annual cost of pension enhancements added in 2000 outside of collective bargaining.
5 percent
— The approximate pay raise equivalent of the $798 million in pension enhancements added in 2000.
$3.5 million
— Estimated annual cost increase to the City for the Heart Bill pension enhancement.
$12,500
— Maximum annual pension supplement in 2008 from the VS Bill.
4.8 percent
— City pension contribution as a percent of payroll in 2000.
9.5 percent
— Projected City pension contribution as a percent of payroll in 2004.
New York State and New York City face significant long-term debt burdens that require the inclusion of unfunded pension liabilities to accurately assess fiscal affordability. Establishing independent debt policy committees and amending constitutional limits are necessary steps to ensure debt levels remain within a manageable danger zone relative to available economic resources.
Recommendations related to Pensions
New York State's elected leaders should bring the State's debt burden below the danger zone threshold identified in this report, and New York City's leaders should keep their debt below the relevant danger zone threshold.
New York City and New York State should create Debt Policy Committees to recommend long-run debt strategies and annual debt issuance limits.
The State Constitution should be amended to establish new limits on State and City debt.
New York State should develop a new plan to lower its outstanding debt.
Unfunded pension liabilities should be added to long-term debt in considering the ability of an entity to repay its debt.
Key Data
$102.3 billion
— Total states' unfunded pension liability used in the calculation of debt affordability.
$161.1 billion
— Total state-local unfunded accrued actuarial liability (UAAL) for pension plans.
$11.2 billion
— Estimated state share of combined state-local pension plans' unfunded liability.
$573 million
— New York's adjusted over-funding of pension systems.
$2.1 billion
— New York City's unfunded pension liability.
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