Pension Reform Now

Mayor Bloomberg made it clear in his State of the City speech that pension reform will be his top legislative priority this year. Taxpayers can only wish him the best of luck-the issue is urgent, but the obstacles are formidable. 

The city needs Albany’s approval to achieve some necessary reforms, such as raising the retirement age for non-uniformed personnel from 55 to 65. Mr. Bloomberg also wants to do away with the outdated practice of handing out annual end-of-the-year bonuses to retired police officers and firefighters, at a cost of about $200 million per year. This is not to be taken as a sign of disrespect, although the unions will characterize it as such. Current retirees will not see their bonuses taken away, but future hires, under Mr. Bloomberg’s plan, would no longer be eligible for them. 

The city spends $7 billion a year on pensions-just a decade ago, the figure was $1.5 billion. This clearly has to change, and the moment seems right: Mr. Bloomberg, who will bear the brunt of union anger over these changes, doesn’t have to worry about reelection and, in any case, his nonpartisan approach to problem-solving will help him win support from taxpayers who ultimately foot the bill for these unaffordable retirement perks.  

Pension reform cannot and should not stop with these measures. The city’s welfare-state system of defined benefits must give way to 401(k) retirement accounts for all new city workers, including police officers and firefighters. Mr. Bloomberg won’t fight that battle, at least not this year, but the time is coming.

The billions paid out in pensions every year are billions that cannot be spent on schools, infrastructure, social services and economic development. Yes, city workers deserve a dignified retirement. But the days of uniformed personnel retiring at 45 or 50 and collecting pensions while embarking on second careers must come to an end. It’s simply unfair and unaffordable.

The battle over traditional pensions looms. In the mean time, Mr. Bloomberg will try to fight these preliminary skirmishes with the unions and their proxies in the State Assembly. The success of his third term may turn on this important issue.

Pension Reform Now