An Expensive Pension Enhancement Bill is on the Move
A bill moving swiftly through the Legislature would reverse recent pension reforms and greatly increase New York City’s pension fund contribution costs. The bill, A9594/S7326, would increase disability pension benefits for police officers hired after July 1, 2009, when a more financially sustainable “Tier III” plan went into effect. The Citizens Budget Commission has updated its Scorecard to include the new bill, introduced on May 12 and now advanced to third reading in the Assembly. A home rule message has been requested from the New York City Council.
In 2009 as state and local governments faced the budgetary implications of the Great Recession, Governor David Paterson vetoed a bill that entitled police officers in Tier III to the pension benefits available to members of Tiers I and II, adopted many years earlier. Tier III requires members to work for 22 years, instead of 20, to collect full-service pensions. Disability benefits are 44 percent of the final average of the last three years’ salary with an offset for Social Security benefits, instead of 75 percent of the final year’s salary with no offset. Tier III was made permanent in the comprehensive 2012 pension reforms adopted under Governor Andrew Cuomo, and is estimated to save the City $31 billion over 30 years.
With more than one-third of all police retirees, approximately 15,000 people, collecting disability pensions, the proposed changes would increase New York City’s costs by $35 million in fiscal year 2015. The actuarial value of contributions required by the City to fund the new benefit would be far greater: $266.4 million in fiscal year 2015, growing to $617.9 million in 2019.
Pension reforms adopted under two Governors have significantly improved the financial outlook for New York City and other local governments by moderating the growth in pension costs. These reforms would be partially reversed by A9594/S7326 for New York City, which may serve as a precedent for benefit enhancements for the uniformed employees of other localities.