Gov. Hochul faces a challenge that will define her legacy as the state’s executive. To succeed, she must do absolutely nothing.
State government, municipalities and school districts give their retirees a taxpayer-guaranteed income. These sorts of pensions are increasingly rare in the private sector, in part because employers must pay more when investments don’t generate enough returns. That’s what happened in New York: taxpayers went from paying less than $1 billion into pension plans in 2000 to nearly $10 billion in 2010.
In response, governors and state lawmakers enacted two rounds of reforms, in 2010 and 2012, that changed how pensions for future employees would be calculated and required them to pay into the system for their entire careers (rather than just the first 10 years). The creation of these new pension tiers shaved roughly $100 billion off the costs New York taxpayers faced between then and 2040 while still giving public workers a (state tax-exempt) benefit unavailable anywhere in the private sector.
Today, about half of public employees belong to what’s known as “Tier 6” and taxpayers are saving well more than $1 billion annually. But with the fiscal pain mostly forgotten, public employee unions are looking to bring back the old pension rules that made costs explode.
Under the banner of “Fix Tier 6,” the unions are pressuring state lawmakers and Hochul to chip away at the pension reforms, insisting — without evidence — that they seriously damaged the state’s ability to recruit and retain workers (a bizarre claim to make when New York State agency payrolls grew more in 2023 than they had in any previous year).
Instead of rejecting this specious argument, the Legislature — where virtually every senator and assemblymember was elected with public employee union support — is playing along. A Senate hearing in October, ostensibly convened to study “recruitment and retention,” devolved into a pep rally for lawmakers bent on gutting the Tier 6 reforms.
Legislative Democrats included as part of their budget proposal a tweak to how pensions are calculated — basing amounts on the last three years of work rather than the last five — which would cost more than $4 billion in the next few decades. Senate Republicans pushed separately for the same change — going so far as to say the state should consider nuking Tier 6 entirely.
While the Republicans, who are essentially powerless in that chamber, were pandering to their labor supporters, they did a public service by raising awareness that labor, indeed, wants to nix Tier 6 altogether. The statewide teachers union uses the euphemism of “Tier 4 parity” to describe its goal of letting public employees retire with full pensions and health care at age 55 or having them go most of their career without paying toward their retirement. For them, the Tier 6 full-pension retirement age — 63 — is unacceptable.
Private-sector workers, by comparison, wait until age 67 to collect full Social Security benefits.
The danger for taxpayers is that once the Legislature agrees to sweeten a pension, the state Constitution prevents subsequent governors and lawmakers from reversing it. That means the unions only need elected officials to do the wrong thing once.
Their enablers in Albany have prudently avoided introducing legislation that would fully roll back the pension reforms, since required actuarial scoring would show the eye-watering costs.
Instead, they’re chipping away with little-noticed provisions in the state budget: an adjustment to pension calculations here, a reduction to retirement ages there, and over the course of a decade, they can bring New York back to the bad old days when pensions crowded out essential programs and caused suburban property taxes to explode.
Even the relatively small change sought this year would slam New York City with almost $170 million in extra pension costs in the first year, with state government, school districts, and municipalities absorbing proportional hits.
Accepting the premise that New York’s pension benefits aren’t generous enough will invite more attacks on Tier 6 — slamming the next generation of taxpayers with costs for services delivered before they were born.
The governor, a newly-minted grandmother, has shown a knack for looking beyond the state’s fiscal horizon, championing the preservation of the state’s rainy day fund and warning about the sustainability of fast-growing state spending programs.
If Hochul stands her ground, the Tier 6 pension reforms will keep working as intended, and she will have thwarted a hundred-billion-dollar heist.
New York taxpayers will be in her debt — because she will have shielded them, and their grandchildren, from an indefensible one their lawmakers tried to stick on them.
Girardin is the research director at the Empire Center for Public Policy.
