New York Gov. Andrew Cuomo on Tuesday introduced his fiscal 2012-13 executive budget. The $132.5 billion spending plan marks a decrease of $225 million from 2011-12. The recommendations cut the projected four-year deficit by more than half, to $7.4 billion from $16.4 billion.
Cuomo, speaking in Albany, called for a continued overhaul of the state’s health care system, and a new tier in the state pension system that he said would save the state and local governments outside of New York City $83 billion and the city itself $30 billion over 30 years.
The new pension plan would have progressive contribution rates between 4% and 6% with shared risk-reward for employees and employers. Cuomo said it includes a voluntary option for defined contribution following the TIAA-Cref model.
Employees taking the defined contribution will vest in the system after one year. This option will be portable. Cuomo said the overhaul would not affect current employees.
“Next to Medicaid, pension costs are the most significant burden on local governments,” said Cuomo, who called for the state to gradually take over yearly increases in Medicaid expenses that county governments now absorb.
Pension overhaul has become a hot-button issue nationally. Rhode Island restructured its public employee plans last year, and movements are afoot in that state to enable its municipalities to change locally administered plans. Legislative leaders in other states, notably Illinois, have pegged pensions as a top priority for 2012.
Cuomo said the $3.5 billion budget gap identified in December was closed through $2 billion in spending cuts and $1.5 billion in revenues from the middle-class tax changes enacted last year.
Even with 4% increases in education and Medicaid spending, and a 2.6% increase in aid to localities, there will be a net reduction in all-funds spending, the governor said. Zero growth in state agency spending is being achieved by redesigning state agency operations, he added.
New York’s general obligation bonds are rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch Ratings.
Shortly after the speech, state Comptroller Thomas DiNapoli, while praising the governor and Legislature for their fiscal improvements last year, warned them to stay on course. “New York must continue its progress on that path during these volatile economic times and guard against any return to the past fiscal gimmicks that exacerbated the fiscal difficulties of recent years,” he said.
New York City Comptroller John Liu said that while his officice needed to review Cuomo’s pension proposal, he re-emphasized his view that defined benefit plans save government employers money.
Earlier in the day, Liu announced that the city’s pension funds will seek to expand their commitment to minority and women investment managers by $500 million.
Speaking at a minority and women broker symposium sponsored by his office at the United Federation of Teachers headquarters in lower Manhattan, Liu said the move would solidify the city’s position as one of the top pension systems in the United States doing business with minority- and women-owned business enterprises, or MWBEs.
“This will mean more jobs, wealth and increased prosperity for more people,” he said.
