Attorney General Andrew Cuomo’s investigation into public pension padding still isn’t complete, but he’s learned enough in the three-plus months since it started to confirm his hypothesis (and what everybody else knew) going in: that the problem is rampant and very costly. Since there’s a good chance Cuomo will become New York’s next governor, we hope he’ll move quickly from the discovery phase of this investigation to promoting specific solutions for reining in the problem, as well as other pension reforms. This will be tricky for a politician who’s counting on union support to get elected, but it’s necessary.
New York’s public pension system, like many others around the country, is threatening to bankrupt the state and its municipalities. When the stock market boom ended roughly a decade ago, the investment returns that enabled the state, and its counties, cities, towns and school districts, to skimp on pension fund contributions every year fell dramatically. This, combined with state legislators’ insistence on continually sweetening pension benefits — which, according to the state constitution, can never be taken away once they’ve been granted — has painted everyone into a corner: Contributions that used to be a few percent of payroll are now 12 percent or more. And they may have to jacked up even more if the standard assumption of an 8 percent annual return on the investment portfolio doesn’t hold up.
The state’s new Tier V, which extends the retirement age and requires contributions for workers hired this year or later, will save the system money eventually — when those workers reach retirement age — but most likely something will have to be done long before then to reduce costs.
As Cuomo discovered — and as this newspaper, for example, has reported on numerous occasions — municipal workers often find ways to work extra hours in their last three years before retirement because they know their pension payments are based on those earnings. They’re gaming the system, but not illegally. Rather than simply rein in their overtime, as Cuomo suggests, why not change the rules so overtime earnings don’t count toward pension benefits? Granted, it wouldn’t be easy politically, but if these and other draconian pension reforms aren’t enacted soon, the state and its municipalities could very well go bankrupt as they struggle to meet their overly generous obligations.