Pensions taking big slice of Albany's pie

albany city hallMunicipal budget fact of the day: pension costs eat 22 percent of the city of Albany's budget tax levy.

The Jennings administration released a letter today it says Jerry Jennings has sent to state comptroller Tom DiNapoli "urging real pension reform." Yep, that sounds like a big bowl of boiled vegetables, but this part caught our eye:

The rising cost of pensions has been one of the greatest burdens on our city's finances and taxpayers.
This problem has evolved into a crisis as you have mandated increases in pension contributions over the last several years which have devastated our city budgets. Over the last decade pension costs have ballooned from roughly $700,000 to over $12 million. In 2001, only 1% of the Albany taxpayers property taxes went to pension costs, as of last year they are paying 22% of their taxes to cover pension costs.
This means that ten years ago Albany residents were contributing approximately $7.50 per person to cover pension costs, today they are paying almost $130.

The full letter is after the jump. Not in the letter: criticism of the leaders and administrations who agreed to the contracts with the unions in the first place.

The larger political soap opera context...

Jennings' letter is part of Andrew Cuomo's push for a new pension tier for public employees -- one that would include a 401k-style option. Jennings is a member of a group called "NY Leaders for Pension Reform" that's been supporting Cuomo's push. DiNapoli has become a Cuomo target on this issue after he called the administration's pension reform proposal "unacceptable" and "extreme." DiNapoli said this week local leaders supporting Cuomo's plan were "misinformed if they believe that any proposed change to the pension system now will provide them with immediate budget relief." It also came out this week that about 25 percent of DiNapoli's campaign cash has come from the public employee unions fighting against the proposed plan. [TU] [NY Post] [State of Politics] [TU] [NYDN]

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MAYOR JENNINGS ISSUES STATEMENT REGARDING NEW YORK STATE PENSION REFORM
Albany, NY - Mayor Jennings today has written the following letter to New York State Comptroller
Honorable Thomas DiNapoli regarding real pension reform:
"I am writing to urgently request that you support real pension reform for our state, which is vital to preserve the fiscal security of New York State's Capital, Albany, New York. In the face of this crisis, the City of Albany needs the institution of Albany to finally reform our pension system.
As the State's chief financial officer, you are charged with protecting the taxpayers and preserving the fiscal security of our state. Given the devastating financial consequences for local governments across our state, you of all people should be championing pension reform, instead of standing in its way.
The rising cost of pensions has been one of the greatest burdens on our city's finances and taxpayers.
This problem has evolved into a crisis as you have mandated increases in pension contributions over the last several years which have devastated our city budgets. Over the last decade pension costs have ballooned from roughly $700,000 to over $12 million. In 2001, only 1% of the Albany taxpayers property taxes went to pension costs, as of last year they are paying 22% of their taxes to cover pension costs.
This means that ten years ago Albany residents were contributing approximately $7.50 per person to cover pension costs, today they are paying almost $130.
Despite the growing financial problems this pattern is causing concern for the city government in Albany, the reforms we need have been stalled by state government in Albany. For years the special interests that control Albany have prevented any real reform of pensions, even as this crisis has grown worse for taxpayers and local governments like mine.
Governor Cuomo has put forward a pension reform that both controls costs and treats state workers fairly.
Under the Governor's plan not a single current employee would see a change in their pension and new employees would only be asked to contribute a little more.
The Governor's pension plan is the responsible fiscal choice for our state and the critical for the financial security of New York's capital. I urge you to reconsider your previous opposition to reform and make the right choice for Albany and our State."
###

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Update: JCE got reaction from DiNapoli's office, which cited many reasons for the current pension situation, including "decisions made by Mayor Jennings and the Common Council in good times to give better, but more costly pension benefits." [TU Local Politics]

Comments

I remember reading an article about how pensions are basically bankrupting Rhode Island and there isn't anything they could (or would) do about it.

Oh, it was easy to find:
http://www.nytimes.com/2011/10/23/business/for-rhode-island-the-pension-crisis-is-now.html?_r=1&pagewanted=all

Scary.

22% of the property tax levy, not the budget. The budget is $169M making it 7% of the budget.

Editors: Thanks for catching that. Fixed.

One thing you don't hear about in the news articles and press releases on NYS pension reform is the historic context of employer contribution rates (these rates are the percentage of salaries the locality or state agency pays to the pension system on behalf of employees).

Over the past 40 years, these rates have fluctuated significantly, from highs of 22 percent in the 1970's to lows near 0 percent in the 1990's and early 2000's. The 2011 rate for the ERS is 11.9 percent, which to close to average. While the State Comptroller estimates the current rate will continue to increase over the next several years, it also estimates it will decrease once again as the economy recovers from the recent Great Recession.

So, when Mayor Jennings says "In 2001, only 1% of the Albany taxpayers property taxes went to pension costs....", he's using figures from a time when the employer contribution rates were unusually low, resulting in a misleading comparison to today.

The business interests that are orchestrating the pension "reform" campaign in NYS will tell you they're doing it to protect taxpayers. In reality, they are simply continuing the efforts they started uears ago in the private sector to replace defined-benefit retirement plans with the less-costly 401(k)-type plans, and extending it to the public sector.

If they are successful, the outcome will be greater leverage on their part to keep compensation of private sector employees as low as possible in the future.


So while the latest increase in pension costs are providing an excuse for politicians and their business patrons to radically reduce pension benefits for public employees in NYS,

Before state & local gov'ts decide to derail defined pensions for civil servants (and don't kid yourself -- that is the intent in structuring higher employee contributions to defined pensions so new hires will choose to go with 401Ks), there should be a close look at the padding of pensions by police & firefighters through the use of overtime. Pull out those figures (which the T.U. did this week) and then evaluate whether defined pensions are really breaking the bank.

And I'm sure Jennings will be perfectly happy to retire someday with his "unreformed" pension. These politicians are such hypocrits once their own nests are feathered.

Also, the Governor's 2012-13 budget is not the appropriate place for any so-called "pension reform." Whatever savings might accrue from changes in the pension system would be many years in the future. Gov. Cuomo is shoving this into the Budget to create a crisis and make legislators vote for this to avoid a gov't shut down over the whole budget being held up. It's political blackmail. It should be a separate bill and be thoroughly debated on its merits, not as a part of a bigger package that must be passed by April 1.

@chrisck - "It's political blackmail." I prefer the term political extortion. The "X" makes it sound cool.

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