New York cuts public pension benefits
New York state legislators have approved a new law that reduces retirement benefits for newly hired state and local public workers. Supporters say the measure will save the state about $80 billion over 30 years, but public union leaders say it will harm middle class workers, according to Reuters.
The bill also gives an out to financially strapped local governments. If the state enacts future pension benefit increases, it will pay for them, rather than passing the cost to towns, cities and counties.
The measure creates a new tier of smaller benefits for future public employees. The changes include raising retirement plan contributions by a sliding scale, raising the retirement age to 63 and calculating benefits on the last five years of employment, instead of the last three. New employees also are limited to using only $15,000 in overtime, adjusted for inflation, in pension calculations.
Gov. Andrew Cuomo said the measures will help reduce pension costs for New York municipalities, which have risen more than 650 percent since 2002, to $12.2 billion in 2012. “Without this critical reform, New Yorkers would have seen significant tax increases, as well as layoffs to teachers, firefighters and police,” Cuomo said in a statement.
AFL-CIO President Mario Cilento called the bill “an assault on the long-term economic security of nurses, teachers, firefighters and other workers,” according to Reuters. He noted that public workers in the state already have experienced layoffs, furloughs, wage freezes and pension cuts.
In recent years, other states — including California, Illinois and Iowa — also have enacted pension reform measures. In January, a U.S. Senate committee released a report stating that state and local governments face a $4.4 trillion pension shortfall because of underfunded pension systems.