To cut back on the amount of money public employees in New York get for their taxpayer subsidized pensions, former Governor Andrew Cuomo created a new group, a new "tier," to reduce the fiscal burden on an already bloated state government.
Just a few years later, current Governor Kathy Hochul, the State Senate, and State Assembly all scrapped this cost-saving move.
Now the bill is coming due, and Suffolk County taxpayers will be forced to shell out big bucks because of it.
These changes to the New York State pension benefits will cost Suffolk County about $20 million a year in 2025 and more in the years following. The pension sweeteners will cost localities across the state $900 million a year.
The major change in pension "Tier 6" changed the lifetime benefit calculation from an average of the last five years of salary to the last three years of salary.
This takes two presumably lower earning years out of the average and boosts the pension payout for every retiree.
Former Governor Andrew Cuomo recognized the out-of-control pension costs over a decade ago and introduced pension reform that created Tier 6 to curb what were runaway costs on already overburdened taxpayers.
Governor Kathy Hochul in her re-election efforts in 2022 agreed to roll back pension reforms in a giveaway to the unions and now that bill is coming due. It is a bill that will get bigger every year into the future. It is a gift to the unions that keeps on taking from the taxpayer.
Pension costs have increased tenfold between 2000 and 2010 went from $1 billion to $10 billion in just ten years. The Empire Center's, Ken Girardin, says costs have escalated for a variety of reasons, “Partially because the pensions got sweetened into 2000. Partially because people were living longer. And, partially because they were making very bad pension decisions. They were making unrealistic assumptions about the return of pensions funds would get.”
School districts and local governments will all see their pension costs rise, which would force them to either cut programs or raise taxes. For many regions in the state, government workers are the largest percentage of the workforce.
Suffolk County Comptroller, John M. Kennedy, Jr., agrees about the cost increases and how they will be paid for.
“We have already got the bills for the 2025 pension contribution, and I believe that we have sustained roughly about a 20% increase. I think the exact number was somewhere in the neighborhood of about a 19.6% uptick,” says Kennedy. “I’m not a policy maker so I can’t say too much about that end of the equation, but I can speak to the numbers because they will hit our books soon.”
Kennedy added that for Suffolk County the additional costs to the taxpayer for 2025 are going to be between $20-22 million. “It’s a larger increase than we have seen in previous years,” says Kennedy.
Suffolk County will come out with a 2025 budget soon and the County Executive will have to address the additional costs due to the pension increases. “In my opinion, and I don't know this for a fact, but I would think that what the policymakers will attempt to adjust other areas of the operating budget,” Kennedy said.
The Comptroller says it will be difficult to keep going back to the taxpayer for more revenue. Savings will need to be found in other areas or potentially the legislature will have to look at service cuts to make up the difference.
Pension costs in Suffolk County right now are about $221 million so a $20-22 million/year increase in pension costs may not seem like a lot – especially in the context of the entire county budget.
“Our annual operating budget is $4 billion. We're larger with the 26th largest county in the United States when it comes to financial operations. And, by population are larger than 11 states in the United States of America. We're a fairly sizable beast,” says Kennedy.
But, $20-22 million bucks is still real money and it will grow every year. No matter what percentage of the budget, the taxpayer will bear the burden one way or the other either through higher taxes or reduced services unless savings can be found.
New York State Conservative Party Chairman, Gerry Kassar, points out that looking for savings is not in the genes of New York State Democrat lawmakers, and they are the ones in power.
“Democrats holding public office in New York State, and over the 12-15 years, have shown time and time again that savings is not something they are interested in looking at. I won’t just pick on the current crop of Democrats. Over recent history, Democrats have been very quick to look at increased government spending on programs as being something quite acceptable no matter the cost to the taxpayer. This pension deal is just another example of that,” says Kassar.
“I don't think our elected officials are thinking about how they're going pay for all of this. Elected officials have a very, very limited perspective on long-term issues,” added Kassar
Kassar points out that for a long time, until maybe the past 25 years, there was a bargain of sorts between the taxpaying public and government unions – you’re salary may be less than the private sector, but you will have great pension and health care benefits.
“That was a bargain people could live with philosophically and financially,” says Kassar, “but then the equation flipped and salaries began to go up, elected officials began to vote themselves and other government employees raises, but the associated health and pension costs didn't go down.”
The bargain that had been made for generations began to slip away. “With pension reforms that made some effort to control costs being repealed, the bargain with the taxpayer is eroded even further, “ added Kassar.
“The Conservative party pushes back on these reform rollbacks, for sure. And, at the same time, we are clearly a group that has a very high opinion of uniform services, but we also know that there's no such thing as a free lunch – there has to be a balance somewhere. A balance between salary and benefits versus costs to the taxpayer have to be included in the discussions.”
According to Ken Girardin from Empire Center, “the share of private sector employees that have access to any sort of pension is dwindling. It was 20% in 2010 and is down to 15% in 2023.” It is not surprising that taxpayers with no pension might be upset about paying for lucrative pensions for others.
Girardin says that a provision in the latest New York State budget that was not paid much attention will, “also be the most costly: their change to state retirement rules will slam New York taxpayers with more than $4 billion in new debt, and immediately drive up local pension costs, by sweetening the pension benefits of public employees.”
“School districts and local governments would all see their pension costs rise, which would force them to either cut programs or raise taxes. The single most harmed employer is the city of New York,” Girardin added.
How did this happen? In a time when New York State, and local towns and cities across the state, are about to hit the financial wall and taxpaying families are suffering in a poor economy with high inflation and already crushing taxes, how could Albany add more debt and tax burden to the citizens of New York and Suffolk County?
It happened because of consistent and strong pressure from the public employee unions and Albany politicians giving in to it to the detriment of every taxpayer.
Girardin says, “There is a very real danger that the legislature will continue going along with weakening the 2009 and 2012 pension reforms. The further we get in time past the global financial crisis, the more state lawmakers are forgetting the lessons that, that were learned.”
The fact remains that any rollbacks in pension reforms cost money – a lot of money. With New York losing population in droves, and tax revenue going with those that move, it is well past time that New York takes a hard look at the expense side of its budget.