Governor Kathy Hochul is in the midst of discussions to implement a $1.5 billion initiative aimed at enhancing the pension plans of government employees, a move that could potentially burden New York City with an additional $328 million in expenses.
This hefty sum risks consuming a significant portion of the revenue expected from the governor’s proposed pied-a-terre tax on luxury secondary homes in New York’s five boroughs. Mayor Zohran Mamdani and city officials had been counting on this income to help address the city’s financial challenges.
Union leaders, including Michael Mulgrew, President of the United Federation of Teachers, are actively lobbying in Albany to reverse the pension reforms put in place by former Governor Andrew Cuomo over a decade ago. These reforms, known as the “Tier 6” changes, were designed to curb pension costs by reducing benefits for public employees hired after April 2012 and increasing the retirement age from 55 to 62. Additionally, these measures required workers to contribute more to their pension funds.
Since their implementation, labor unions have consistently advocated for a rollback of these changes. As part of the ongoing state budget discussions, a proposal is being considered that would allow public sector employees to retire at 55 while lowering their pension contribution requirements. This adjustment would, however, shift the financial burden to state and local governments, requiring them to increase their contributions.
Labor leaders have lobbied to scale back the changes ever since.
The proposed porkapalooza now being eyed as part of the ongoing state budget negotiations would allow civil servants to retire at 55 and contribute less toward their pension — while requiring state and local governments to pay more.
Budget watchdogs said it would be fiscally irresponsible to impose such the unfunded mandate on local governments.
“New York state should not enhance Tier 6 pension benefits. The expansions under consideration would cost the state, local governments and school districts billions of dollars next year and annually in the future, likely driving property tax increases or siphoning money from other programs,” said Citizens Budget Commission director Andrew Rein.
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“That is just a large tip of a multi-billion-dollar iceberg that threatens to increase taxes, reduce services, or destabilize the budgets of New York City, other local governments, school districts, and public authorities,” he said.
The plan under consideration by Hochul and the Democrat-controlled state Legislature would cost $1.5 billion a year: $242 million for the state, $328 million for New York City, $480 million for school districts and $407 million for local governments, the CBC estimated.
That’s on top of Tier 6 boosts in 2022 and 2024 that cost state and local governments $438 million annually, Rein said.
The Conference of Mayors, Association of Counties and Association of Towns recently issued a joint statement opposing the pension sweetener — unless Albany picks up the cost.
But Mamdani has said he was open to the rollback, even while he pushes for other assistance from the state.
“I’ve long said that I think there need to be changes to Tier 6 because we need to make it as easy as possible for New Yorkers to enter a life of public service,” said Mamdani, a former state assemblyman.
That was before Hochul on Wednesday proposed the new tax on luxury second homes that’s intended to raise $500 million for the city, in the aims of helping Mamdani cover an estimated $5.4 billion budget gap. She also agreed to give the city $1.5 billion in February to help with the purported deficit.
Rein said the Tier 6 reforms have not been impeding recruitment, as opponents have claimed, and still provides a more generous “defined benefit” pension rarely offered in the private sector.
He said local governments should lift the pay for for hard-to-fill jobs and challenging working conditions, rather increasing pensions.
Hochul has confirmed discussions about a potential pension changes as part of budget talks that have extended past the April 1 deadline, but stopped short of saying what the outcome would be.
“The governor has a strong record of supporting New York’s workers and will continue to negotiate in good faith with the Legislature to pass a budget that makes New York more affordable for working families,” a Hochul spokesperson said.
Sources close to the budget talks said Hochul will likely agree to some sort of pension deal — but likely at a price tag lower than $1.5 billion.
Several Republican lawmakers recently appeared at rallies on Long Island sponsored by law enforcement unions lobbying for the pension boost.
City Comptroller Mark Levine, a former city councilman who is a member of Tier 6 and has been quiet on the issue, declined to comment.
The pension deal will likely be among the last items dealt with in the state budget, along with Hochul’s controversial proposals to delay implementation of the state’s green energy law and curb fraud and lawsuits in auto insurance market in a bid to save a bundle on car insurance.
