Several local government groups are warning that New York property taxpayers could face tax rate hikes or service cuts due to pension reform proposals being debated as part of this year’s now-late state budget.
In a recent statement aimed at Gov. Kathy Hochul and Legislature leadership, the groups said the state budget needs to include sufficient funding for any public employees’ pension changes that get approved. They urged Hochul and lawmakers to “resist the impulse to pass those costs on to local property taxpayers,” citing state law intended to ensure state government shoulders the financial responsibility for pension benefit enhancements.
“Counties, cities, towns, and villages already operate under severe fiscal constraints — the property tax cap, rising costs for essential services, and the growing burden of unfunded state mandates,” the groups said.
“Any increase in employer pension contribution rates resulting from Tier 6 (pension) amendments would force local governments to make impossible choices: cutting essential services, eliminating positions, or seeking property tax increases that local taxpayers cannot afford,” they added.
The groups also asserted local governments will soon take a hefty financial hit as pension fund returns previously projected to stabilize employer contributions for 2027 have been altered due to recent stock market unpredictability. Nearly 60% of county, city, town and village employees currently participate in Tier 6, they noted.
It’s not the first red flag being raised about the push for pension reform. The Citizens Budget Commission also said last month that changes could increase taxes and destabilize budgets.
What Hochul, state lawmakers say about NY pension reform
Hochul and several state lawmakers have publicly supported state public employees’ push for lower retirement ages and reduced penalties for those under the state’s Tier 6 pension system, which has been in place since 2012.
“Governor Hochul is proud to support New York’s state and municipal employees and has enacted significant reforms to enhance the retirement benefits for Tier 6 members,” a spokesperson for Hochul’s office said. “Governor Hochul will continue to negotiate in good faith with the Legislature to pass a budget that makes New York safer and more affordable.”
Here’s a look inside the ongoing Tier 6 reforms fight.
How much could pension reform cost New York taxpayers?
Taxpayers could be facing a $1.5 billion annual price tag under a proposal set forth by labor unions seeking Tier 6 changes, Newsday and Gothamist reported.
The plan would add an additional $242 million to the $3.4 billion the state already projects it will spend on pensions next year. On the local level, New York City’s pension costs would increase by $328 million, school districts would have to pay $480 million more and local governments would have to pay $407 million, according to Gothamist.
New York State Budget Director Blake Washington told reporters last week they’re taking a look at proposals brought to them and are “assessing what we can afford.”
“That’s a reflection of this Tier 6 debate is how do we preserve really competent people in those workforces?” Washington said. “But alternatively, we have to make sure that we’re able to pay for it. And it’s not just we, the state of New York, but local governments as well.”
Tier 6 members would be able to retire at age 55 if they’ve put in 30 years in the public sector and, depending on their income, they would only have to contribute a maximum of 5% to their pensions through the proposed plan. Public employees outside the city would also be able to count more overtime toward their pension benefits, Gothamist reported.
Why do public employees want Tier 6 changes in New York?
Currently, Tier 6 members, or any full-time, permanent, 12-month employees of New York state or a participating employer who joined the state’s retirement system on or after April 1, 2012, must pay more of their salaries into the pension system than other tiers and face heavy penalties if they retire before age 63, according to New York State United Teachers (NYSUT).
It’s causing a staffing crisis, labor advocates say. Those in the Tier 6 system pay 3-6% of their salaries into the pension system the entire length of their career and their contributions go up as their pay increases. Comparatively, the contributions of those in the Tier 4 system are capped at 3% and end after 10 years and they have the option to retire at age 55 without any penalties.
There are currently 780,000 public workers enrolled in Tier 6, NYSUT says, and over 100,000 of the union’s members have earned reduced pensions compared to earlier tiers. NYSUT asserts changing the system will help keep people in the workforce and encourage the recruitment of new employees.
Some improvements have been made to the system in recent years. Pensions have been largely calculated on a worker’s highest three consecutive years of salary instead of five since 2024, aligning those in Tier 6 with members in other tiers.
Emily Barnes covers state government for the USA TODAY Network-New York with a focus on how policy and laws impact New Yorkers’ taxes, communities and jobs. Follow her on Instagram or X @byemilybarnes. Get in touch at ebarnes@usatodayco.com.
This article originally appeared on Rockland/Westchester Journal News: NY pension reform costs for taxpayers come into focus. What we know
Reporting by Emily Barnes, New York State Team / Rockland/Westchester Journal News
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