Governor's New Pension Reform Plan Will Save Onondaga County $1.4 Billion And Cayuga County $208 Million Over The Next 30 Years
Albany, NY (March 21, 2012)
Lieutenant Governor Duffy today joined Onondaga County Executive Joanie Mahoney, Auburn Mayor Michael Quill and CenterState CEO Chairman Allen Naples to hail Governor Andrew Cuomo's recently passed pension reform plan that over the next three decades will save Onondaga County over $1.4 billion and Cayuga County over $208 million.
Lieutenant Governor Duffy said, "Like many New Yorkers, Governor Cuomo recognized that our state could no longer afford the skyrocketing pension costs that are placing huge burdens on the taxpayers. His proposal, which was passed by both the Senate and Assembly, significantly reforms our pension system while preserving retirement security for public workers. The bill that Governor Cuomo signed into law creates a new Tier Six that will save New York state more than $80 billion over the next 30 years, and Onondaga County more than $1.4 billion over 30 years. That is real money that can go towards schools, infrastructure improvements and lower taxes. I thank County Executive Mahoney, Mayor Quill and Chairman Naples for their dedication to seeing this new law become a reality."
Onondaga County Executive Joanie Mahoney said, "Governor Cuomo’s new comprehensive pension reform law will save our state more than $80 billion over the next 30 years, including $1.4 billion for Onondaga County. This will go far in addressing unsustainable pension cost increases and help close budget gaps while maintaining important public services. I thank the Governor for responding to our call for help and applaud the Legislature for passing this important legislation."
Auburn Mayor Michael D. Quill said, "During these difficult economic times, it becomes ever more important for city governments like Auburn to serve our constituents despite limited resources. Governor Cuomo’s new pension reform package offers localities a practical solution that will save Auburn $25 million over the next thirty years, allowing us to avoid painful layoffs and tax hikes. I commend the Governor for his leadership and assistance in serving all New Yorkers."
Allen Naples, Chairman of CenterState CEO, said, "The new pension reform package signed into law by Governor Cuomo signals a new era not only for local governments across the state, but also for businesses and families in New York. The state will save more than $80 billion over the next three decades, helping municipalities to afford their pension costs and preventing job cuts and tax increases. This translates to more jobs for our families and fewer taxes for our businesses which will help boost local economies and grow the state as a whole. I congratulate the Governor for this significant accomplishment as he rebuilds the Empire State."
The state's rapidly growing pensions costs are one of the most expensive mandates for local governments. In 2002 pension payments from local governments were $1.4 billion and have grown to $12.2 billion in 2012, an increase of over 650%. The pension reform plan passed by the Senate and Assembly recognizes the unsustainability of the current system and takes unprecedented steps to control growth, saving state and local governments, including New York City, more than $80 billion over the next 30 years.
The Governor's pension reform will save Onondaga and Cayuga Counties the following amounts:
|County||Total 5 Year Savings||Total 10 Year Savings||Total 30 Year Savings|
The new law puts in place a new Tier VI pension plan for workers hired after April 1, 2012. Existing employees and retirees retain all benefits. The new law includes:
- New Employee Contribution Rates: The new tier increases employee contribution rates in a progressive fashion to ensure lower paid state and local workers are not seriously affected. Employee contribution rates vary depending on salary:
- $0 - $45,000: 3%
- $45,000 - $55,000: 3.5%
- $55,000 - $75,000: 4.5%
- $75,000 - $100,000: 5.75%
- $100,000+: 6%
These rates remain substantially lower than the large majority of similar state systems around the country.
- Increase of the Retirement Age: The pension reform law includes an increase in the retirement age from 62 to 63 and includes provisions allowing early retirement with penalties. For each year of retirement prior to 63, employee pension allowances will be permanently reduced by 6.5%.
- Readjustment of Pension Multiplier: Under Tier VI, the new pension multiplier will be 1.75% for the first 20 years of service, and 2% starting in the 21st year. For an employee who works 30 years, their pension will be 55% of final average salary under Tier VI, instead of 60% under Tier V. This readjustment brings New York more in line with most other states and will save billions of dollars for taxpayers and local governments.
- Vesting: Under Tier VI, employees will vest after 10 years of service.
- Protect Local Governments From State Pension Sweeteners: The new law requires the state to pre-fund any pension enhancers, ensuring that these costs are no longer passed to local governments.
- Adjustments to Final Average Salary Calculation to Help Reducing Pension Padding: The law changes the time period for final average salary calculation from 3 years to 5 years. To limit how much overtime can be used to determine an employee's pension, pensionable overtime for civilian and non-uniformed employees will be capped at $15,000 plus inflation, and for uniformed employees outside of New York City capped at 15% of base pay. Tier VI puts in place new anti-spiking measures which cap growth in salary used to determine pension allowances at 10% for all employees statewide. These reforms will take major steps toward addressing instances of abuse and pension padding. Tier VI also eliminates lump sum payments of unused sick and vacation time from the calculation of final average salary.
- Voluntary and Portable Defined Contribution Option: The new law includes an optional defined contribution plan for new non-union employees with salaries $75,000 and above. In the modern economy, employees often change jobs multiple times and need pension portability. Many states, the federal government, and most private employers provide some form of defined contribution plans to their employees. The state will make an 8% contribution to employee contribution accounts. Currently, SUNY and CUNY offer such an option through TIAA-CREF that has been successful and popular. This is a voluntary option for those employees who prefer the portability and vesting feature not available with defined benefit options, and will help attract top talent to state government.
- Adjustments to SUNY/CUNY TIAA-CREF Plan: Under Tier VI, SUNY and CUNY employees who elect the TIAA-CREF plan will receive an employer contribution of 8% of salary for the first 7 years of service and 10% thereafter.
- Limiting Number of Sick and Leave Days that Can Pad Pensions: Tier VI reduces by half- from 200 to 100- the number of sick and leave days that can be used for retirement service credit.
- Salary Reform: Previous tiers allowed salaries from an unlimited amount of employers for calculating retirement benefits. Tier VI allows only two salaries for the calculation.
- Limiting Pension Benefit of High Paid Employees: For new higher paid employees, the amount earned above the Governor's salary (currently $179,000) will not be eligible for pension calculation under Tier VI.
The Governor's Executive Budget closes the current $2 billion budget deficit with no new taxes or new fees. It also proposes sweeping mandate relief and pension reform that will save taxpayers and local governments billions of dollars.