After Gov. Andrew Cuomo introduced his proposed changes to New York pension plans last week, Gov. Chris Christie issued a news release touting "Pension Reform on Both Sides of the Hudson."
Unfortunately, to the extent Christie's plan is similar to Cuomo's, it's nothing to boast about. The pension packages offered by both governors differ in some respects but have the same fundamental shortcoming: while raising retirement ages and reducing benefits, they would preserve the existing defined-benefit system, which is the root of the problem.
Unfortunately, to the extent Christie's plan is similar to Cuomo's, it's nothing to boast about. The pension packages offered by both governors differ in some respects but have the same fundamental shortcoming: while raising retirement ages and reducing benefits, they would preserve the existing defined-benefit system, which is the root of the problem.
As long as that root remains, taxpayers will be exposed to the open-ended financial risks posed by a complex and opaque pension funding structure that invites abuse. This has wrought especially severe long-term consequences in New Jersey, where public pensions are more grossly underfunded than in New York. What Cuomo and Christie are billing as "pension reform" could more accurately be called "pension reduction" -- which, if experience is any guide, will not necessarily be permanent and will not yield the projected long-term savings.
The deal would raise pension contributions immediately by at least 1 percent for public workers such as local police and firefighters, teachers, state police, and state, county and municipal workers. Judges, who put 3 percent of salary toward their pensions, the least of any public worker group, would see that amount increase to 12 percent.By comparison, state employees in New York contribute to their health insurance at rates of 10 percent for individual coverage premiums, and 25 percent for additional family members. However, plenty of local government and school employees around the Empire State contribute less -- or, as in the case of New York City, nothing at all. For the Big Apple alone, adoption of a 20 percent average employee share of premium costs would save more than $800 million a year.
The deal also would require employees to pay more for health care under a new salary-based contribution formula that would be phased in over four years. The rate would be as high as 35 percent of the cost of the premium for top wage earners and as low as 3 percent for the lowest-paid employees. Most workers now pay 1.5 percent of their salary toward health care regardless of the cost of their plan.
Unlike New Jersey, New York has a state constitutional provision making it impossible for the state to directly increase pension contributions by active employees. However, like New Jersey, New York's governor and Legislature do have the statutory authority to set a floor under public employee contributions negotiated by local labor unions.
Cuomo's pension "reform" bill is not expected to see action during the final week of this year's legislative session -- and, unlike Christie, Cuomo has not broached that possibility of setting a floor under public employee health insurance premiums, although he did unsuccessfully attempt to negotiate larger contributions with state employee labor unions.
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