In the ongoing budget discussions in the Senate and Assembly, a proposed $4B increase for public pensions could add to New York taxpayers’ debt. The decision is controversial, with fiscal conservatives worried about potential negative impacts on the state’s economy, while others insist the funds are necessary to secure public workers’ retirement. In lack of these resources, they fear the pension system might face insolvency.
The potential increase affects ‘Tier 6’ state and city workers employed since 2012. The changes could recalculate the Final Average Salary (FAS) over three years, leading to enhanced pensions overall. The larger FAS calculation might generate as much as $2.2 billion in debt for New York City’s pension systems—and an additional $1.5 billion for the New York State and Local Employees Retirement System.
Taxpayers may bear up to $4.4 billion in total expenses. This could immediately cost New York City an additional $163 million annually in pension expenses, possibly doubling by 2040.
Contemplating pension hike’s impact on New York’s debt
Initial costs for New York State are estimated to be at least $57 million, excluding further expenses for the state’s TRS system bills for SUNY and CUNY staff.
Unions representing public employees demand a reversal of 2012 pension reforms, though they have yet to demonstrate how enhanced pensions would benefit the public. They argue the 2012 changes were unfair to workers and unsustainable, citing petty retirement incomes. Despite this, critics worry about the additional burden on taxpayers that would result from reverting these reforms.
Enhanced pension benefits are a crucial element in the fight for attracting workers in the post-COVID labor market. They are state income tax exempt and guaranteed by state taxpayers. As the deliberation continues, workers across the state anticipate the outcome, hoping for a favorable impact on their financial futures.
