For years, decades even, New York has been dithering about an impending budget catastrophe: the ever-escalating cost of offering gold-plated and utterly outdated pension benefits to public employees. Everybody knew something had to be done. There were some brave attempts to create a fix here and there, but unions made it clear that they would punish anybody who dared to even consider radical reform.
Finally, we have a governor who understands that his first duty must be to the taxpayer, not to the unions—even though many of those unions supported his campaign. Governor Andrew Cuomo has decided to face the issue head-on with a broad plan to reform pension benefits in both the state and in New York City. His quote was simple and direct: “The numbers speak for themselves,” he declared. “The pension system as we know it is unsustainable.”
Precisely. He is not the first person to realize this. But there is a difference between spotting a problem and doing something about it. Mr. Cuomo has chosen the latter course. He wants to raise the retirement age for most state workers from 62 to 65, and for teachers from a youthful 57 to a more-realistic 62. State and city workers would have to contribute 6 percent of their earnings to their pensions, up from 3 percent.
Best of all, Mr. Cuomo is moving aggressively against the corrupt but widely accepted practice of pension-padding. That’s when workers run up stunning overtime earnings in the final years on the job. Pensions are then calculated based on the inflated figure rather than on workers’ true salaries. Enough is enough. The governor wants to exclude overtime earnings and unused sick time from pension considerations. Predictably, the union bosses are raising hell about these common-sense solutions. Danny Donohue, who heads the state’s largest public employee union, played the class card by accusing the governor of carrying out the wishes of his “millionaire friends” at the expense of “the real working people of New York.”
That’s curious—does Mr. Donohue believe that public employees are the only working people in New York? If so, he has been in the union business too long. There are millions of real working people in New York who are being crushed by high taxes. They are the people paying for those pensions and health benefits. They’re the people who suffer when public employees work the system to inflate their pensions.
Another union boss complained that the governor was imposing horrendous cuts for what is, in his words, a “transient problem.” Transient? Anybody who follows state government knows that Albany’s finances have been in disorder for years, and all signs indicate that things will only get far worse without true pension and benefit reform. Again, anybody who thinks that the state’s problems are “transient” really isn’t paying attention or simply doesn’t care about the tax burden on other working people.
If anything, the governor could have gone even further with reform. He could have proposed an end to the state’s generous system of defined-benefit pensions, in which many—but not all—state retirees collect a fixed percentage of their salaries until they die. All governments are going to have to shift to 401(k)-style pensions in the coming years. Mr. Cuomo isn’t prepared to that go far, at least not yet.
Still, what he has proposed is revolutionary enough. Early-retirement packages would come to an end. Workers would be vested after 12 years in the system instead of 10 or, in the case of some uniformed workers, five.
The state and city simply can’t afford a pension-and-benefit system designed for another age. The city now spends $8.4 billion per year on pension costs. A decade ago, the figure was $1.1 billion. At the state and local government levels outside of New York City, pension costs have gone from $368 million per year to $6.6 billion over the past 10 years.
Mr. Cuomo realizes that this is simply unsustainable. Luckily for the working people of New York, he is determined to do something about it.