New York is battling an unprecedented fiscal crisis and, as state legislators, my colleagues and I are entrusted by the people to make the difficult decisions and to determine what areas in the state budget can afford to be cut. In undertaking this project, we could not afford to rely on one-shot payments that will only serve to get the state through this fiscal year, leaving it worse off for the following year. The state pension system is an example of one of the state’s long-term costs and reform of this system has been desperately needed.
The Tier V pension reform bill was passed during the extraordinary legislative session and was signed this month by the governor. The bill accomplishes our goal of continuing to provide state employees with a generous pension package, while also saving the state and local government’s money. Under the Tier V pension plan, new employees will have to contribute three percent of their salary toward their pension during the entirety of their employment. (Previously, they only had to contribute for the first 10 years of service.) And employees must work 10 years, not just five, to become eligible to receive a pension. The retirement age rises to 62 for most workers and 57 for teachers. These changes will aid the state and local governments through these trying economic times.
The new pension system will also close a loophole that allowed police and firefighters to use overtime to boost the “final average salary” on which pensions are based. This practice resulted in many retirees collecting pensions that were actually larger than their base salary at retirement. Instead of all overtime counting towards the final average salary, only 15 percent of that time will count.
Over the next 30 years, state and local taxpayers are expected to save a combined total of more than $35 billion. Locally, over the same 30-year period, the new pension plan will save Fulton County $18,518,857, Herkimer County $14,450,969, and Otsego County $15,813,051.
As always, if you have any questions or concerns on this or any other state issue, please don’t hesitate to contact me at either my Johnstown office at (518) 762-6486, or my Herkimer office at (315) 866-1632.