ALBANY, N.Y. (AP) — New York state Comptroller Thomas DiNapoli has unexpectedly lowered the employer contributions to the pension system made by governments, school districts and their taxpayers, which have all been slammed by years of pension cost increases.
The surprise move for the 2014-15 fiscal year will be a welcome break for governments and schools that have been bracing for another increase. Those pension costs, along with dwindling populations and tax revenues, are driving some local governments toward insolvency, although none has declared bankruptcy as have some municipalities in other states.
The business group Unshackle Upstate immediately tweeted that the move is “not enough. We need reform measures.” The group has sought much deeper cuts in the pension contributions of governments and school districts to relieve pressure on taxpayers paying some of the nation’s highest property taxes and to help spur the economy.
Acting on a recommendation in the latest five-year analysis by Buck Consultants of New York City and on his actuaries’ advice, DiNapoli lowered the employee contributions by about 1 percentage point, when governments feared they would have increased by that much or more. The government and school cost of the pension is about 20 percent of payroll. The state pension covers workers in state government and most local governments and schools outside New York City.
The reduction will be about eight-tenths of 1 percentage point for those workers, and 1.3 percent for the state’s Police and Fire Retirement System, a separate pension system.
The data from the latest five-year review as well as recent gains in Wall Street investments that recovered losses from the recession make the reduction possible, DiNapoli told The Associated Press.
“Strong gains over the last four years have mitigated some of the impact of the financial market collapse of 2008-2009,” he said. “Strong investment performance, along with a revision in actuarial smoothing, has lowered the contribution rate.”
The New York State Association of Counties warned as recently as Sunday of another expected pension contribution increase. It’s a cost that has been vexing local governments and school districts since the recession and forced increases in what were already some of the nation’s highest property taxes.
“We are still paying for when the bottom fell out of the stock market in 2008,” said Orange County Executive Ed Diana, the association’s president. “We can’t overstate the impact that these increases have had on every single municipality in New York.”
In 2011, Gov. Andrew Cuomo and the legislature created a new, less expensive tier of pensions for new hires to reduce the future cost to governments and schools. The state constitution prohibits lowering the pension benefits of workers and retirees already in the $158 billion pension system.
This year, the Legislature approved a plan with DiNapoli’s advice to lower current costs even more than DiNapoli’s plan by offsetting them against anticipated lower costs when the economy rebounds. DiNapoli had questioned that approach, and some local leaders, led by Syracuse Mayor Stephanie Miner, called it risky borrowing against a rosier future that may not materialize.
DiNapoli’s current proposal is more conservative and based on gains in Wall Street investments already received and on an analysis by the independent consultant.
The change combines equity assets and nonequity assets, rather than separating them as has been done in the past. That serves to smooth out gains and losses and provides a dependable, and in this case, less expensive bottom line cost, DiNapoli said.