Cuomo to Propose Changes to New York State Pension System

Governor Andrew Cuomo said he will propose a bill within days that would lower the amount New York state and its local governments will pay in pension costs for future employees.

“We can’t afford the public pension system we have in this state, period,” Cuomo, a Democrat, said today in a briefing for reporters in Hempstead on Long Island.

The cost of pensions and health benefits for active and retired employees will grow to $6.2 billion in fiscal year 2014, from $1.3 billion in 1999, Cuomo said. New York’s $140.6 billion pension fund is the nation’s third largest.

Cuomo wants to raise the minimum retirement age to 65 from 62 for most workers, said a person familiar with the plan who wasn’t authorized to speak publicly before it is introduced. He also would require 12 years of work to qualify for a pension, up from 10, and double worker contributions, the person said.

The plan would save $93 billion over 30 years, the person said. That’s $30 billion more in savings than switching to a 401(k)-like plan would produce, the person said.

The governor is also seeking to mitigate so-called pension padding, in which employees artificially inflate their salaries with overtime pay in the final years of employment to receive bigger retirement checks.

‘Has to Stop’

“There has been an institutionalized fraud in the system that has to stop,” Cuomo said. “Most people are law-abiding citizens and they don’t game the system. It’s the people who do game the system that everyone else has to bear the cost.”

New York City Mayor Michael Bloomberg proposed a similar plan for future workers in February, in which they couldn’t count overtime in calculating retirement pay and wouldn’t receive full retirement benefits until 65.

Cuomo’s press briefing followed a speech at Hofstra University, the third stop on his “People First” tour to pressure lawmakers to approve a property-tax cap, tighter rules on ethics and a bill to allow same-sex marriage. Lawmakers must consider his agenda before their session ends June 20, which he called “D-Day.”

Campaign Promises

Cuomo, 53, the son of three-term Governor Mario Cuomo, took office in January after he was elected with 61 percent of the vote. Holding to his promises on the campaign trail, he reduced total outlays 2 percent in his $132.5 billion budget to help close a $10 billion deficit. The governor has also threatened to fire 9,800 state workers unless they agree to $450 million of savings, which is included in the budget.

“Governor Cuomo is scapegoating public employees and this is more evidence that he really doesn’t care about working people,” Stephen Madarasz, spokesman for the Civil Service Employees Association union, said by telephone. The 300,000- member association is the state’s largest public union.

The average CSEA retiree earns $14,000, he said. Cuomo’s proposal will “complicate” negotiations under way for the union’s 66,000 state executive branch employees, he said.

Public pension costs are “one of the main drivers” of the high property taxes New Yorkers pay, Cuomo said.

“We have to reduce pension costs,” he said. “Otherwise we’ll never stop the taxes from going up.”

Three of the five counties with the highest property taxes in the U.S. are in New York, according to the Tax Foundation in Washington. Topping the list is Westchester County, north of New York City, whose median property tax was $9,044 in 2009. The median for U.S. counties was $1,917.

New York’s mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.

To contact the reporter on this story: Esmé E. Deprez in Hempstead, New York at edeprez@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net