NY workers lose pension fight

The New York Legislature early Thursday morning voted to reduce the pension benefit for newly hired state and some local government workers. The pension cuts are part of an austerity package proposed by Gov. Andrew Cuomo, a Democrat, to reduce government budget shortfalls.

The new pension plan known as Tier 6  creates a sixth tier of benefit levels for newly hired public service workers.   Tier 6 workers will receive a lower pension, work longer until being eligible for a full retirement benefit, and most will pay a higher contribution rate, some will pay double what current workers pay. Unions estimate that the new legislation reduces pension benefits by 40 percent over the lifetime of a worker’s public service.

Ken Brynien president of the New York State Public Employees Federation (NYPEF) said that his members were “appalled” by the passage of Tier 6 “that will do nothing to help the state or local governments deal with their current budget demands.”

“The state has too few benefits to offer prospective  employees now, with forced furloughs, rampant short-staffing and employee morale  at rock-bottom lows,” Brynien said. “This new pension tier means any new hires the state  attracts must work harder and longer for a retirement that’s significantly less secure than those of their more senior coworkers.”

“This deal is about politicians standing with the 1 percent – the wealthiest New Yorkers – to give them a better break while telling nurses, bus drivers, teachers, secretaries, and laborers to put up and shut up,” said Danny Donohue, president of the Civil Service Employees Association AFSCME Local 100.

Just before the legislature voted for Tier 6, the Committee to Save New York, a group of real estate investors, bankers, hedge fund operators, and other wealthy New Yorkers, launched a $2.5 million ad campaign in support of Tier 6. The ad campaign was full of  hyperbole and misinformation.

If you saw the ads, you might think that the state pension plan, which provides benefits to state workers and local government workers in Upstate New York, was about to run out of money and need a huge government bailout like the banks received in 2008 and 2009.

But the fact is that the pension system, which serves 600,000 New Yorkers, is fully funded, which means that it has cash and assets on hand to pay full benefits for the next 31 years even if it receives no new contributions or investment income.

If you saw the ads, you might think that the cost of funding the pensions is so high that local governments are about to go bankrupt.

But the fact is that while the cost of funding has increased substantially, the high costs are not permanent; they are instead the result of a slow economy and the stock market crash that lowered investment returns, which provide more than 80 percent of the pension plan’s funding.  As Brian Curran of NYPEF told the New York World,”The actuaries for the state pension system, the New York City pension system, the teachers retirement system all say the same thing – these costs will peak out and decline as the economy stabilizes.”

And if you saw the ads, you might think that retirees are receiving sky-high pension payments. But the fact is that the average pension for a retired New York public service worker is about $19,000 a year.

Since the effect of the pension cuts won’t take place for several years, they won’t have any impact on current budget shortfalls.

Unions and community groups have offered an alternative to cutting pensions that will raise revenue immediately–end corporate tax loopholes such as requiring real estate investment partnerships to pay the taxes they owe, reforming the corporate Alternate Minimum Tax, and taxing non-resident hedge fund management fees.

“New York state income taxes have become like Swiss cheese as more and more tax breaks have been added to the tax code in the name of economic development,” said Frank Mauro of the Fiscal Policy Institute. Mauro estimates that closing corporate tax loopholes will generate at least $1 billion annually.

For now though, Gov. Cuomo and the legislature have shifted the burden of closing state and local budget gaps to newly hired public service workers.

“Closing tax loopholes would have provided immediate relief to cities and communities in New York,” Donohue said. “Instead the governor and the legislature chose to stick it once again to working families.”

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3 thoughts on “NY workers lose pension fight

  1. This is depressing but not too surprising. I guess you could say the only good thing is that they did not replace the pension with a 401(k). Or maybe not. I don’t know the financial details.

    Note this is a Democratic governor. It’s not just the right-wing Republicans who are doing this stuff to public employees.

    A bill passed in the 2009 Texas Lege effectively established a two-tiered pension system for Texas state employees by changing the pension criteria rules for new hires, making it more difficult to retire, and lowering benefits for those retiring before age 60 (as I recall). Some provisions affect current employees as well. And the contribution rate for all employees was increased.

    The Texas State Employees Union has successfully fought much more drastic bills which would end the current pension system for new hires and put all of them in 401(k)’s. But watch out for the 2013 legislative session. A bunch of rich guys in Houston–including hedge fund operators, which you mention in this article–are engaged in a relentless campaign to end pensions entirely for ALL public employees in the state. Needless to say, they have much more money than we do. But also, needless to say, we will continue our struggles against these attacks.

  2. Les, you are correct in pointing out that BOTH parties are harming workers!
    One vital factor that teachers and other pulic workers need to understand is that wasting trillions of precious dollars on unjustified, illegal wars affects them and funding of their employer’s services to the community.
    While it’s good that the AFL-CIO has recently put forth a proposal that addresses the economy, it notingly fails to address the waste in the war(s) economy.

    • Pancho–just got an email from US Labor Against the War that the Amalgamated Transit Union is joining CWA and UE as the only three (inter)national unions to affiliate with USLAW. Of course the waste in the war economy is one of the major themes of USLAW. I am forwarding this email to the Texas Labor Against the War listserve and others. There’s no story about it yet on the USLAW website, so I can’t post a link on the TxLAW FB page. Maybe I’ll just put it on FB as a straight post. I’m proud to be in a local of CWA in this regard. Of course lots of locals have affiliated with USLAW. TSEU passed a resolution at our general assembly almost 4 years ago opposing the wars in Iraq & Afghanistan and resolving to explore affiliation with USLAW, but we haven’t–one reason being that the union is chronically broke.

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