Rising Public Sector Pension Costs Threaten To Swamp State, Local Finances & Stick Taxpayers With The Bill

Legislative column from Assembly Minority Leader Brian M. Kolb (R,I,C-Canandaigua)
December 10, 2010

On December 6, it was reported that California Governor Arnold Schwarzenegger would declare a “fiscal sate of emergency” to force state lawmakers there to close a $6 billion gap in state finances. You may remember that last spring I had publicly called on Governor Paterson to take similar action by urging the state Legislature to declare New York in a state of financial emergency. If the Governor had taken my advice, we could have begun the necessary steps to close the budget deficit, resuscitate the economy and, most importantly, begin making some of the long overdue structural changes necessary to have state government run a surplus as opposed to operating under chronic shortfalls and budgetary uncertainty.


One of those much-needed structural changes is, without question, reforming New York’s public pension system whose exploding costs threaten to swamp state and local finances. A report just released by the non-partisan, independent Empire Center for New York State Policy has confirmed this fact. The Empire Center’s report, “New York’s Exploding Pension Costs,” makes a clear and compelling case for reform and can be read at the Empire Center’s Web site.

There are three pension funds covering eight distinct public retirement systems that presently operate in the Empire State – that fact alone is very telling and sheds some light on the sheer complexity of this problem. Those systems are the New York State Teachers’ Retirement System (NYSTRS); New York State Employees’ Retirement System (NYSERS); New York State Police and Fire Retirement System (NYSPFRS); New York City Employees’ Retirement System (NYCERS); New York City Teachers’ Retirement System (NYCTRS); New York City Board of Education Retirement System (BERS); New York City Police Pension Fund (PPF); and New York City Fire Pension Fund (FPF), respectively.

According to the Empire Center’s report, from 2007 to 2009, three of New York’s taxpayer-supported public pension funds lost a total of more than $109 billion, or 29 percent of their mutual assets. Two of the three funds ended their 2010 Fiscal Years with asset values below Fiscal Year 2000 levels, while the third has seen little growth over the past 10 years. At the time these funds were either depreciating or seeing minimal asset expansion, the number of pension fund retirees and other beneficiaries has actually risen by 20 percent, while total pension benefit payments have doubled over the past decade.


The changing dynamics of New York’s public pension funds – and how those changes affect your financial bottom line – really boils down to basic arithmetic. When public pension funds lose a significant portion of their value – at the same time more people are drawing benefits from those funds – government must step in to close any shortfall since here in New York these public benefits are guaranteed in the State Constitution and cannot be diminished for current workers.

If history is any guide, government “stepping in” is really a euphemism for taxpayers paying more, typically in the form of higher taxes and fees, ballooning budget deficits and more debt incurred by the government borrowing more money. Bottom line? As countless parents have repeatedly told their kids - “there is no such thing as a free lunch” – New York’s public pension fund shortfalls will have to be covered, one way or another. Meeting these obligations already poses a clear and present burden to New York’s cash-strapped local governments. If the pension funds continue their decline, that obligation will further spill over onto taxpayers.


The time for reforming New York’s public pension system is now. Merely crossing our fingers and hoping the funds will recover over the next decade is unacceptable. We need to begin gradually and ensure any efforts aimed at fixing the system do not target individuals who played by the rules and already are drawing a pension for their years of service. Instead, we need to focus our efforts on new employees, especially elected officials and non-civil service appointees, all of whom receive a public pension upon retirement.

I support bi-partisan legislation – Assembly Bill A.6932, introduced by my Assembly Minority colleague Michael Fitzpatrick of Long Island – that would freeze the current retirement tier of all elected officials and non-civil service appointed employees in New York State. The initiative also would create a new “Defined Contribution Plan” for them as well. A Defined Contribution Plan is essentially a retirement plan in which a certain amount (or percentage) of money is set aside annually by an employer for an employee’s benefit. With New York’s finances in such tough shape, I believe elected officials and non-civil service appointees must lead by example.


This legislation does not target folks working on the front lines of government who deliver the essential services and run the programs so many people count on in these tough economic times. Instead, it starts with elected officials and non-civil service appointees, as it rightly should. If enacted into law, this legislation could provide significant savings to state and local governments alike and help shield taxpayers from exploding public pension costs.

As always, constituents wishing to discuss this topic, or any other state-related matter should contact my district office at (315) 781-2030, or e-mail me at kolbb@assembly.state.ny.us. You also can follow me on Facebook and Twitter for the latest news and informational updates regarding state government and our Assembly Minority Conference.