New York Gov. Andrew Cuomo is leaning on lawmakers to pass a pension overhaul package that he says would save the state $113 billion over 30 years.
On Monday, Cuomo took his message to the state’s mayors.
“Mayors have a close relationship with the electorate. People get what a mayor is supposed to do. The mayor is always around, so the communication is constant. There’s no abstraction,” Cuomo told reporters after speaking in Albany at the annual meeting of the New York State Conference of Mayors.
Cuomo, in his annual budget message last month, said he wants to create a sixth tier of public employee pensions. Tier VI would include a 401(k)-type defined contribution plan for new employees, raise the retirement age to 65 from 62, impose longer vesting periods, and eliminate a practice called pension padding, where employees accumulate substantial amounts of overtime in their final years of service to increase their pensions.
According to the governor, pension contributions by the state, local governments, and schools since 2001 increased to $6.6 billion from $368 million outside New York City.
During the same period for New York City, pension costs increased from $1.1 billion to $8.4 billion
Favoring a 401(k) plan puts him at odds with state Comptroller Thomas DiNapoli and several lawmakers who have the backing of public sector unions.
“I’m not against 401(k) plans. I’m in one myself, but as a supplement. It should not be a substitute and I feel very strongly about that,” DiNapoli said at the same conference Monday.
DiNapoli, in an op-ed column last week calling for traditional, defined-benefit pensions, cited data provided by the Center for Retirement Research at Boston College that said 401(k) plans lost a collective $1 trillion during the Great Recession.
Cuomo hinted Monday that he could compromise with state lawmakers by dropping the 401(k) provision if they favor other elements of his plan.
“To me, it’s the most troublesome part of the proposal,” DiNapoli said. “Taking it off the table would make a lot of sense, in my point of view.”
“Obviously, we’ll be negotiating with the Legislature. At the end of the day, it’s about saving money. I want maximum savings,” Cuomo said. “I was born flexible. I’ve gotten more flexible as governor. A veritable Gumby you need to be to be a governor.”
New York City Mayor Michael Bloomberg, who favors Cuomo’s proposal, intends to lobby for its passage in Albany on Wednesday. “We face a ticking time bomb in rising pension costs,” Bloomberg said in his budget proposal last month. Since fiscal 2002, city-funded pension costs have increased by nearly 500%, to $8 million in fiscal 2013.
Many states are beginning to tackle pension overhaul.
A far-reaching plan passed last year in Rhode Island, which enacted a hybrid retirement plan involving traditional defined-benefit pension and part 401(k)-style savings plan.
Lawmakers in that state also raised the minimum retirement age, curbed cost-of-living benefit adjustments for retirees, and hinged those adjustments on the funding level of the retirement fund.
