Paterson Makes a Deal With Unions, Officially

As reports in the last few days have said he would, David Paterson just announced a deal with public employee unions that will spare proposed layoffs by offering members buyouts, and in exchange for enacting a less-generous pension program, called Tier V, for newly-hired employees.

Details from the governor's office are below. This agreement should be a big boost for Paterson: he can claim credit for pushing through Tier V, and at the same time he will neutralize the voice of a very potent (and well-funded) critic that has pulled few punches in its rhetoric.

GOVERNOR PATERSON ANNOUNCES AGREEMENT WITH STATE PUBLIC EMPLOYEE UNIONS

Unions Will Support Most Significant Reform of the State and Local Pension System in 25 Years to Provide Long-term Savings to Taxpayers

Agreement Achieves Workforce Reduction and Necessary Current Budget Year Cost Savings

Governor David A. Paterson today announced that he has reached an agreement with the Civil Service Employee Association (CSEA) and the Public Employees Federation (PEF) that will provide long-term savings to New York taxpayers and achieve immediate workforce savings while avoiding large scale layoffs in a difficult economic climate. In addition, these unions have announced that they will support the Governor's efforts to implement the most significant reform of the state's pension system in more than a quarter century.

"This agreement is a huge win for New York's taxpayers and will lead to the most significant reform of our public pension system in decades," said Governor Paterson. "This is real reform to the pension system which will substantially reduce costs to the taxpayers of New York State."

"I want to thank the union leadership for doing what is right by their workers and New York," said Governor Paterson.

This agreement when fully adopted will save taxpayers approximately $440 million over the next two years, which is approximately the amount that was projected to be saved through the proposed workforce reduction plan announced in March. In addition, the unions will support the imposition of a new Tier V in the Retirement System, a proposal the Governor has championed since last year.

The agreement will also reduce the state workforce by approximately 7,000 positions through a targeted separation incentive, aggressive attrition and the elimination of positions that are funded but are currently vacant. In addition, a voluntary reduction in work schedule will be implemented to achieve cost reductions.

"This agreement means a smaller state workforce, savings for taxpayers, and a new pension tier that provides long-term fiscal stability for the State," continued Governor Paterson. "As I have said from the beginning of this process, my overriding goal was to achieve needed savings and workforce cost reductions, while at the same time avoiding large scale layoffs during the worst economic downturn in a generation. This agreement achieves those objectives in a compassionate and fiscally responsible way."

Key components of the announcement include the following:

Tier V Pension Reform (Net Two-year Savings $25 million). CSEA and PEF will support creation of a new tier of pension benefits ("Tier V") for civilian employees. This reform will provide combined taxpayer savings of approximately $30 billion over the next thirty years for the state and municipalities outside of New York City. The City of New York will also achieve billions of dollars in additional savings.

In accordance with constitutional requirements, these new pension reforms would apply only to future public employees. Key components of Tier V include the following.

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    • Raising the minimum age at which an individual can retire without penalty from 55 to 62, and imposes a penalty of up to 38 percent for any employees who retire prior to age 52.
    • Requiring employees to continue contributing 3 percent of their salaries towards pension costs for their entire careers rather than ending their contributions after 10 years of service.
    • Increasing the minimum years of service required to draw a pension from 5 years to 10 years.
    • Capping the amount of discretionary overtime that can be considered in the calculation of pension benefits at $10,000 per year.

Workforce Reduction (Net Two-year Savings $240 million). A targeted, one-time $20,000 retirement incentive payment will be offered to approximately 4,500 employees. Incentives must be approved by each respective agency and the Division of the Budget and will only be provided to individuals in positions that will be permanently abolished. Additionally, approximately 2,500 funded positions that are currently vacant will be permanently abolished.

Voluntary Reduction in Work Schedule (Net Two-year Savings: $156 million). Each union will be provided with a proportional savings target in line with the size of their respective portion of the workforce, which they will work in concert with their membership to achieve through a voluntary reduction in work schedule.

Other savings are achieved by offering a one-time separation incentive payment of $20,000 to certain state employees. The incentive will require approval by the employing state agency and the Division of Budget to ensure that these positions will be abolished.

"I call on the legislature to enact Tier V pension reform before the end of session to provide real property tax relief to New Yorkers," said Governor Paterson.