Red flags are starting to be raised over New York’s push to reform its Tier 6 pension system as a state government watchdog group says changes could increase taxes and destabilize budgets.
Many public employees across the state are calling for lower retirement ages and reduced penalties for those under the state’s Tier 6 pension system, which has been in place for over a decade. And while Gov. Kathy Hochul and other state legislators have shown their support for reforms, the Citizens Budget Commission (CBC) isn’t on board.
“The expansions under consideration would cost the state, local governments, and school districts billions of dollars next year and annually in the future, likely driving property tax increases or siphoning money from other programs,” the CBC’s president Andrew S. Rein said in a March 23 statement.
Here’s the latest.
Why are concerns developing over changing New York’s pension system?
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.
But the CBC says the system isn’t obstructing recruitment and the issues in need of addressing are instead low pay and challenging work conditions.
“Enhancing Tier 6 would increase current workers’ benefits without service gains,” the CBC asserts.
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.
These enhancements and others made in 2022 cost the state and local governments $438 million annually, the CBC says. And, according to the CBC, a 2022 estimate for an additional proposed change — reducing progressive employee contributions — surpassed $700 million annually.
While the group doesn’t have an estimate on how much the latest pension system changes would cost, they say it’s “unfortunate that state leaders are considering spending potentially billions of dollars of New Yorkers’ money without revealing the cost, or who would pay.”
The changes would also increase pension contribution rates more than two percentage points, the CBC says, which is an exemption to the state’s property tax levy cap.
“That is just a large tip of a multi-billion dollar iceberg that threatens to increase taxes, reduce services, or destabilize the budgets of New York City, other local governments, school districts, and public authorities,” the CBC added.
What NY state lawmakers are saying about pension reforms
Legislation hasn’t been formally introduced in the state’s budget, but Hochul has previously said she’s fighting for changes to the system. When asked about the CBC’s statement, a spokesperson for Hochul’s office provided the following response:
“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. Governor Hochul continues to negotiate in good faith with the Legislature to pass a budget that makes New York safer and more affordable.”
Sen. Robert Jackson, a New York City Democrat and chair of the Senate Civil Service and Pensions Committee, says pension reform is about balance, not “rolling back fiscal responsibility.”
“It is about modernizing the system so public service remains a competitive and sustainable career,” Jackson said in a statement. “While we have taken measured steps to improve Tier 6, additional changes under discussion are intended to address ongoing workforce challenges in a responsible way.
“We are mindful of the concerns raised. That is why any approach must be incremental and fiscally sound. At the same time, inaction also carries real costs — particularly as staffing shortages drive overtime spending and impact service delivery.”
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 reforms could raise taxes, weaken budgets, watchdog group says
Reporting by Emily Barnes, New York State Team / Rockland/Westchester Journal News
USA TODAY Network via Reuters Connect
