Sweetening public pensions has consequences for taxpayers

It wasn't a surprise when State Comptroller Thomas P. DiNapoli announced that employer contributions into the state public pension system would rise for the next fiscal year.

DiNapoli had previously signaled an increase was possible. But it became a near-certainty after the State Legislature approved a sweetener for public employees in Tier 6 of the pension system — basi ng  an employee's final average earnings on the average of their highest three consecutive years of compensation, instead of the top five.

Under DiNapoli's new pension contribution rates, the average government employer in the employees retirement system would pay 16.5% of their payroll, up from 15.2%. For the police and firefighters retirement system, average contributions will rise from 31.2% to 33.7%. 

Beyond addressing changes to Tier 6, the contribution increases will help improve the funding levels of the pension funds themselves. That's a good thing. DiNapoli's goal always has been to keep the pension funds as close to 100% funded as possible; they're now above 93%, and moving in the right direction. Also key is ongoing attention to potential market volatility at a time when the Federal Reserve has begun to reduce interest rates.

DiNapoli has given municipalities plenty of warning on this most recent contribution boost. They know what to expect and the changes are still more than a year away. It's up to counties, towns, villages and school districts to prepare for the upcoming increases, to find savings and to keep taxpayers informed about whatever changes may be on the way — including tax increases.

Other worries loom. State lawmakers may not be done with their efforts to make pension system changes, especially to Tier 6, both for active employees and recent retirees. Inflation concerns have led some advocates and lawmakers to consider increases to cost-of-living adjustments for retirees, for instance.

Such advocacy is understandable. But it's critical that any additional decisions recognize there will be consequences. Continued increases in employer pension contributions won't be sustainable and no one will welcome the tax increases needed to pay for them. State lawmakers who argue such sweeteners are needed to attract more people to government service should think twice before further enhancing Tier 6 pensions; these same officials are promising constituents they will try to make the region more affordable. They have to do both.

What's more, taxpayers should be able to analyze the impact of this year's Tier 6 adjustments, and the resulting pension contribution increases, before any additional moves are made. Will changing the calculations actually have the intended impact of retaining and attracting public employees? State lawmakers should assess and publish the data before drawing definitive conclusions — or taking further steps.

Local budgetary challenges are ahead. Long Island's elected officials and taxpayers should ask state legislators currently running for reelection and their challengers about how they will hold down these costs.