June 29, 2009
Pension time bomb
Long after the national economy recovers, New Yorkers likely will pay higher taxes to replenish government pension systems which suffered huge losses during the recession.
New Yorkers are not alone, writes Robert Julian, president of Ithaca-based Retirement Planning Consultants and a semi-retired Cornell University instructor. State pension funds have collectively lost at least $1 trillion as the financial markets have dropped over the past year. The Center for Retirement Research at Boston College states that pension funds will need $270 billion in additional contributions over the next four years and more than $100 billion annually for two decades hence to shore up their pension funds. (snip) The state of Illinois is facing a nearly $50 billion deficit in its pension funds and is trying to sell the state lottery to raise $10 billion. The city of Chicago balanced its budget, but officials said they had to sell the Skyway toll road, the city's major parking garages and Midway airport. Kentucky is reporting a $30 billion gap in pension funding. Closer to Ithaca, the Dryden Central School District...is anticipating a $803,882 increase in its pension bill for former teachers and $408,124 for other employees. This year's bill was around $1 million for teachers and $275,000 for other employees. "Those two alone are $1.2 million that we will have to make up next year," [according to School Superintendent Sally Sherwood.] Julian notes that New York Governor David Paterson has proposed a new pension tier for future state and local government retirees. It would raise the retirement age to 62 from 55 and require employees to contribute 3 percent toward their pensions throughout their employment.
As NY Public Payroll Watch pointed out Thursday, the Legislature has not approved Paterson's Tier 5 plan, which leaves a big gap in the state budget and uncertainty about a proposed $20,000 employee buyout plan.
"Going forward could require a leap of faith," a Times Union columnist writes today . First, Paterson has to trust that he'll get a Tier 5 pension bill passed in the Legislature. The new tier was part of the package the governor and unions agreed to in order to avoid the elimination of 8,700 jobs.
Second, he's banking on the notion that the Legislature won't have to approve his writing $20,000 checks to 7,000 state employees willing to leave the system. That's $140 million, although cutting workers and work hours should save money, said Morgan Hook, a spokesman for the governor. Paterson is free to proceed with the buyout program without bills being passed, Hook said. Legislative sources are not sure.
In his June 5 press release announcing the $20,000 buyout plan, Paterson said "approximately 4,500 employees"--not 7,000--would be offered buyouts.
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