State Lawmakers Debating Cuomo's Pension Plan

7:03 PM, Feb 3, 2013   |    comments
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Governor Andrew Cuomo; AP Photo

By Joseph Spector, Albany Bureau Chief

ALBANY - Some local government leaders say Gov. Andrew Cuomo's proposed pension-smoothing plan might not be the most fiscally prudent measure.

They just don't see an alternative as they grapple with rising retirement costs.

"You're trying to find anything to help you through this," Rockland County Executive Scott Vanderhoef said.

In his budget address Jan. 22, Cuomo proposed a Stable Rate Pension Contribution Option. It would allow local governments and schools to realize expected pension savings in the coming years rather than wait decades for the cost breaks.

Local governments and state lawmakers are now debating whether the plan is worth adopting into law. It would also need to be approved by the overseers of the state and teacher pensions funds.

Cuomo said the measure is fiscally sound. Fiscal conservatives said it's a gimmick and could jeopardize the health of state's pension systems.

Comptroller Thomas DiNapoli, the sole trustee of the state's $150 billion pension for 1 million state and local government workers and retirees, said he has concerns. Yet he hasn't taken a formal stance.

The Teacher's Retirement System, an $88 billion fund for 149,000 retirees and 277,000 active members, voted Thursday to hire an outside consultant to review Cuomo's plan.

Pension costs have been a growing burden on schools and municipalities. The cost is soaring 40 percent for schools next year, and it's up 11 percent for local governments after increasing 37 percent in 2012.

The expense is expected to climb for another year or two before dropping as the funds make up for losses on Wall Street during the recession.

Cuomo wants to frontload expected savings from a new pension tier, called Tier VI, which offers less generous retirement benefits to new government workers.

"It's inarguable that in the future with Tier VI, the numbers will come down," Cuomo said last Tuesday.

The plan would limit the contribution rate paid by municipalities and schools to 12.5 percent a year for 25 years. There would be limited opportunity for the rate to be adjusted.

Rochester Mayor Thomas Richards said Cuomo's plan is a viable option to avoid further cuts to services and staff. Cuomo's plan would at least normalize pension costs, Richards said.

"We'll do better if we get ourselves on a level payment and stick to it rather than bouncing around all over the place," Richards told reporters last Monday.

Cuomo said if local governments don't like the plan, they don't have to participate.

Some said they would not, arguing that it would only further imperil local finances.

"It's like crack cocaine. You're going to get a quick high today, but you're going to end up in the gutter," Westchester County Robert Astorino said.

Westchester County last year entered into a pension amortization program through the comptroller's office. It lets local governments essentially borrow off the pension fund and pay back the costs with interest over 10 years.

A growing number of governments are doing it, including Monroe and Tompkins counties and the city of Elmira, Gannett's Albany Bureau reported last month.

Astorino said the county had little choice but to enter the comptroller's program. Its pension bill grew from $3 million in 2001 to $91 million this year.

Astorino said Cuomo's plan is worse than amortization because it's simply relying on future savings. Astorino said the state should simply let municipalities and schools borrow for pension costs on the open market, a less expensive alternative than the comptroller's plan.

Schools are particularly pinched. They don't even have the amortization plan, and they need voter approval for their budgets and if they want to exceed a 2 percent property-tax cap.

Edward Fuhrman, superintendent of the Croton-Harmon school district in Westchester, said districts want to avoid the pension cost spikes. Yet it's unclear whether Cuomo's plan would lock them into higher rates down the road, he said.

"We don't want to be paying 12.5 percent when others around us are paying 6 percent," he said. "That's the fear in a nutshell."

The state teacher's union said it would wait for retirement system's review of the proposal before staking a position. The union has three representatives on the 10-member teacher pension board; the others are legislative appointees and one appointed by the comptroller.

"At first glance, it could provide some badly needed relief to school districts," said Carl Korn, spokesman for the New York State United Teachers union. "But at the same time we want to ensure the pension system, which is among the best funded in the nation, remains strong."

Chemung County Executive Thomas Santulli has opposed the pension amortization program, but he said Cuomo's plan might be more palatable.

He said local governments simply are running out of options. Cuomo and state leaders have yet to embrace reforms to unfunded state mandates that are hurting local budgets, Santulli said.

"If what we see is what we are going to get, and there is not going to be really any changes," he explained, "we are going to need to do some of these things that we traditionally don't like to do."

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