Governor's New Pension Reform Plan Will Save Chautauqua, Erie and Niagara Counties More than $3.7 Billion Over The Next 30 Years
Albany, NY (March 23, 2012)
Lieutenant Governor Duffy today joined Buffalo City Comptroller Mark Schroeder, Jamestown Mayor Samuel Teresi, Niagara Falls Mayor Paul Dyster, North Tonawanda Mayor Robert Ortt and President and CEO of the Buffalo Niagara Partnership Andrew Rudnick to hail Governor Andrew Cuomo's recently passed pension reform plan that will save Chautauqua, Erie and Niagara Counties more than $3.7 billion over the next three decades.
Lieutenant Governor Duffy said, "Governor Cuomo took office with the promise to put government spending under control in order to better serve New Yorkers. With his leadership, the Senate and Assembly recently passed a comprehensive pension reform plan that will help local governments across the state better manage their future pension payments which were growing at alarming rates. The newly created Tier Six – which saves New York State more than $80 billion over the next 30 years – is yet another testament of the Governor’s commitment to carrying out his promise. Under this new plan, Chautauqua, Erie and Niagara Counties together will save more than $3.7 billion, including nearly $272 million for Buffalo. These savings can then be focused on rebuilding the economy in Western New York by delivering public services, investing in local businesses, improving infrastructure and reducing the local tax burden. I thank Mayor Brown, Comptroller Schroeder, Mayor Teresi, Mayor Dyster, Mayor Ortt and President Rudnick for their instrumental support in rebuilding our Empire State."
Buffalo Mayor Byron Brown said, "The pension reform legislation, that passed both houses of the legislature, will contribute to the long term fiscal sustainability of Buffalo and other NYS municipalities. Over the long-term, under Governor Cuomo's leadership in passing this important legislation, Buffalo taxpayers will ultimately benefit by reducing city government's contributions to the state pension system."
Buffalo City Comptroller Mark J.F Schroeder said, "Governor Cuomo has provided the relief that Western New Yorkers so desperately needed. This reform means that over the next three decades, the City of Buffalo will save nearly $272 million and Erie County will save almost $2.7 billion. These savings will be put toward revitalizing communities, creating new jobs, and keeping taxes down."
Jamestown Mayor Samuel Teresi said, "Out-of-control pension costs threatened the functionality and fiscal health of local governments for years. Now due to the Governor’s landmark pension reform, mayors all across the state can shift focus back to revitalizing our cities and providing vital services to constituents without being crippled by soaring retirement costs. With more than $31 million in savings for Jamestown and more than $407 million for Chautauqua County, our city can invest in our neighborhoods and generate job creation. I applaud Governor Cuomo and the Legislature for passing this reform and congratulate all New Yorkers as we move toward a brighter tomorrow."
Niagara Falls Mayor Paul Dyster said, "I am thrilled that Governor Cuomo and the Legislature successfully passed a far-reaching pension reform plan. The Governor has again made government work for Western New Yorkers by saving the City of Niagara Falls nearly $57 million and Niagara County more than $605 million over the next 30 years. This momentous plan was long overdue. Without altering the retirement benefits of any current public employee, the obligation of through the roof pension costs has been lifted off the shoulders of future taxpayers. I thank the Governor and legislators for effectively addressing this imperative issue."
North Tonawanda Mayor Robert Ortt said, "The new pension reform package passed by the Legislature and spearheaded by Governor Cuomo will save the state more than $80 billion over the next three decades, including more than $605 million for Niagara County and nearly $24 million for the City of North Tonawanda. In this uncertain economy, municipalities are struggling to balance their budgets, making these savings even more crucial to our survival. Reining in future pension costs allows us to put our savings towards delivering public services and maintaining retirement security for public workers. I thank the Governor and Legislature for their hard work."
Andrew Rudnick, President and CEO of the Buffalo Niagara Partnership, said, "I am pleased to host Lieutenant Governor Duffy as he and Governor Cuomo continue to advance New York as a more business-friendly state. In tackling runaway pensions with the new Tier Six, the Governor will save taxpayers in Erie and Niagara Counties about $3.3 billion over the next 30 years. This plan will enable our local governments to reduce spending and stay within last year’s 2% property tax cap. Pension costs are some of the biggest detriments to living and doing business in New York State, and this plan takes major steps towards enhancing New York’s future. The introduction of defined contribution options, along with the state fiscal takeover of any “sweeteners” that have become the norm for pension tiers, are major improvements in a system that has long needed reform. Local governments can utilize those improvements for tax reduction, business investment and job creation, leading to an improved business climate to attract new companies and expand existing ones. I thank the Governor and the Legislature for getting the Buffalo Niagara region and the rest of New York back on track."
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 Chautauqua, Erie and Niagara 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.