New York Gov. David Paterson on Friday announced he had reached an agreement with two large unions to make major changes in the state pension system that he said would save the state more than $30 billion over 30 years.
The agreement with the Civil Service Employee Association and the Public Employees Federation, which together represent more than 120,000 of the state’s approximately 200,000 municipal workers, would reduce benefits for new municipal employees while preserving benefits for current workers.
“This agreement is a huge win for New York’s taxpayers and will lead to the most significant reform of our public pension system in decades,” Paterson said in a press release. “This is real reform to the pension system which will substantially reduce costs to the taxpayers of New York State.”
The agreement requires approval by the Legislature.
The unions also agreed to reduce the state workforce by approximately 7,000 positions through a combination of offering retirement incentives, attrition and the elimination of 2,500 unfilled positions that are currently vacant. Paterson estimated that this will save the state $440 million over the next two years. In return for union support, the governor backed off a plan to lay off 8,700 workers.
The centerpiece of the agreement is the creation of a new tier of pension benefits, called Tier V, that would apply to New York City employees as well as other municipal workers in the state, not including police and firemen. The new tier raises the retirement age to 62 from 55, increases the minimum years of service required to receive pension benefits to 10 years from five years, requires employees to contribute to their pension costs for their entire career rather than for just the first 10 years, and caps the amount of overtime that can be used to calculate pension benefits.
The announcement drew praise from elected officials, including Senate Majority Leader Malcolm Smith, D-Queens, who called it a common-sense compromise in a time of economic distress.
State Comptroller Thomas DiNapoli said in a statement that the agreement was “fair to New York’s taxpayers, fair to CSEA and PEF members, and financially beneficial to state and local governments in the long run.”
New York City Mayor Michael Bloomberg said the new tier would save the city billions of dollars and rein in “out-of-control” pension costs.
“The creation of a new pension tier, which our administration has long been urging, is the only responsible way to address the long-term fiscal health of our city and state,” Bloomberg said in a statement.
