DiNapoli: State, local government pension contribution rates to increase

ALBANY — State Comptroller Thomas DiNapoli said Tuesday state and local governments will pay a higher employer rate into the public pension system beginning next year, which could lead to higher taxes.

DiNapoli said a study of investments, inflation, a cost of living increase for retirees, deaths among pensioners and rising salary trends require the increase of more than 1 percentage point of total payroll for each government.

The average employer’s contribution will increase to 16.5% of payroll for the public employee pensions system, from 15.2%, DiNapoli said. The average employer contribution for the separate and smaller police and firefighters retirement systems will rise to 33.7%, from 31.2%.

How much the increased employer contribution could translate into taxes would be up to local governments as they prepare their budgets. The higher rates will be effective in the 2025-26 state fiscal year that starts April 1, 2025.

The increased employer cost reflects in part a move by the State Legislature earlier this year to enhance benefits for more than 703,000 public workers including teachers who are in Tier 6 of the pension system and hired after 2011. The added cost to school districts and local governments is estimated to be more than $377 million this year.

Supporters said the sweetener was a needed reform to attract and retain workers.

Tier 6 was adopted by the legislature in 2012 to reduce benefits in the system as an emergency measure to make sure the pension system could still cover its obligations to retirees because people were living longer and the stock market became a less predictable source of revenue.

A spokesman for the New York State Association of Counties didn’t immediately respond to a request for comment.

DiNapoli (D-Great Neck Plaza) is the sole trustee of the $267.7 billion public pension Common Retirement Fund, which serves more than 520,000 retirees and retirees’ beneficiaries. Those retirees will get a 1.5% cost of living increase for the first $18,000 in a year’s benefits.

The increase can range from 1% to 3% under a law adopted by the Legislature in 2000.

For local governments, the pension cost is a big part of budgets and often is cited as a driver of tax increases. More than 710,000 current and former state workers are in the pension system.

"These rates — in addition to our prudent management and long-term strategy — will help ensure public employees and their families receive the benefits that they have earned," DiNapoli said Tuesday.

The pension system projects a return on long-term investments to remain at 5.9%.

By Michael Gormley

michael.gormley@newsday.com@GormleyAlbany

Michael Gormley has worked for Newsday since 2013, covering state government, politics and issues. He has covered Albany since 2001.