Long Island villages face soaring pension obligations

State public pension contributions for villages across Long Island will total more than $115 million between now and February 2013, forcing officials to consider hiring freezes, tax increases and potential service cuts.

The villages' 2013 tab alone is more than double what it was in 2010, largely because of the state's need to make up for substantial stock market losses the pension plans suffered in 2008 and 2009. Pension payouts are guaranteed by the state constitution, and when stocks do poorly, local employers have to make up the difference -- a process that lasts for years after the market losses occur.

"Your back is against the wall," Amityville village treasurer Donna Barnett said. "I don't know if, historically, there's ever been a time like this. It's not a pretty thing."

Local villages' 2012 payments, totaling $52.6 million, are due by the end of next month, and $62.8 million must be paid to the state in February 2013. In 2010, by comparison, villages paid just $28.9 million in pension contributions to the state.

The payments come as revenues have fallen and costs have risen across local budgets, the Long Island economy has lost jobs, and consumer spending has diminished. Making the contributions will be even tougher if villages try to adhere to the state's new 2 percent property tax cap, officials said. At the state level, Gov. Andrew M. Cuomo has proposed the creation of a new tier for future employees in an attempt to bring pension costs under control. But some local officials say that's not going to help them now.

On Long Island, all public entities -- from counties and towns to schools and special districts -- will pay a record $2.9 billion into the pension system between now and February 2013, a 69 percent increase over the previous two-year period. Payment information beyond 2013 is not yet available from the state.

Villages across LI affected

The challenges of rising pension payments are largely the same among the region's 88 incorporated villages that pay into the state retirement system, from newer villages such as West Hampton Dunes on the East End, which incorporated in 1993 and has five full-time employees, to older, larger villages like Hempstead, which incorporated in 1853 and has 400 employees.

Although some villages pay only into the state Employees' Retirement System, villages like Amityville and Hempstead that have police departments must also contribute to the Police and Fire Retirement System.

"It's the unfunded mandates that are really driving the villages out of business," said Warren Tackenberg, executive director of the Nassau County Village Officials Association and former mayor of New Hyde Park. "There will be a tipping point, but I don't know where that is."

In the Village of Hempstead, where contributions are rising from $3.9 million in 2010 to $7.5 million in 2013, officials are trying to manage the budget through attrition. Treasurer Raymond Calame said the village is considering amortizing its pension bill to spread the payments over several years, although interest will be charged at a rate that is set each year and has recently ranged from 3 percent to 5 percent.

"It's a big balancing act," Calame said of the villages' limited options for dealing with the pension costs.

The public pension contribution is calculated as a percentage of payroll. That rate has risen significantly since 2010. Public entities will pay 16.3 percent of their payroll into the Employees' Retirement System this year and 18.9 percent of payroll in 2013. For the Police and Fire Retirement System, which more than 30 Long Island villages also pay into, rates will rise from 21.6 percent in 2012 to 25.8 percent in 2013.

Guv seeks to control costs

Cuomo has proposed a new Tier VI within the state system for future employees, which would give the option of a defined contribution plan and prevent overtime from being used in pension calculations.

"The answer is getting control of the skyrocketing cost of pensions, which is why Governor Cuomo is committed to reforming the pension system to reduce costs for taxpayer and state and local governments," said Cuomo spokesman Matt Wing.

Village officials say eventually changing the pension system won't help them in the present, especially as they deal with the 2 percent property tax cap law. Under the law, municipalities can override the cap with a vote of 60 percent of its board members. That may be the answer for many, said Felix Wienclaw, treasurer of Islandia, Lake Grove and Mastic Beach, the Island's newest village.

"Everybody who is going to come out under the tax cap will cut services left and right," Wienclaw said. "I will counsel my boards to override it."

Wienclaw said that even Mastic Beach -- with just three full-time employees -- has to deal with significant retirement costs. The village will have to pay a $99,426 start-up tab to the state, according to the comptroller's office. Wienclaw said that's far higher than he had anticipated.

"The struggle is to try to maintain the same level of services that people in the village expect to receive from their local government, while juggling a limited levy amount and expenses that are beyond our control," said Jonathan Fielding, clerk and treasurer for the Village of Manorhaven.

Fielding estimated that $2.5 million of the village's $3.6 million budget was for mandated expenses, including retirement and health care expenses paid to the state, fire costs paid to the Port Washington Fire Department, and sewage-treatment outlays paid to the sewer district.

That means Manorhaven taxes could rise even when Fielding makes cuts to the parts of the village budget he can control, if the other line items increase.

Despite the concerns, Stephen Funsch, administrator for the Village of Southampton, argued that incorporated villages remained a more "efficient source of government" that can still provide high levels of service. To meet pension contributions, the village has had a hiring freeze for three years that probably won't lift soon, Funsch said.

Meanwhile, officials hope there won't be any unexpected expenses in the months ahead, such as last year's snowplowing needs.

"We're trying not to curtail the services -- and we're hoping for a warm winter," Funsch said.

Top 5 LI villages in terms of pension contributions

These five villages all contribute to both the Employees' Retirement System and the Police and Fire Retirement System. Pension contributions are based on a percentage of payroll. That percentage is decided by the New York State comptroller.

HEMPSTEAD

$3,939,240 paid in 2010

$7,523,501 to be paid in 2013

FREEPORT

$3,768,510 paid in 2010

$7,278,395 to be paid in 2013

GARDEN CITY

$2,161,659 paid in 2010

$5,281,442 to be paid in 2013

ROCKVILLE CENTRE

$1,806,056 paid in 2010

$4,145,731 to be paid in 2013

LYNBROOK

$1,377,399 paid in 2010

$2,968,385 to be paid in 2013

*Source: New York State Comptroller, Newsday research