Not so sweet

Jun 21, 2010
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While the State and local governments struggle to pay for current salaries and fringe benefits of public employees and to fully fund the pension system for retirees - resorting to a "borrowing" scheme to stretch out required payments - the State Legislature has remained undeterred in introducing and acting upon bills that would add even more costs. As of June 15th, there were at least 50 two-house bills that would "sweeten" already generous benefits for public employees (not including dozens of bills benefiting individual people, offering retirement incentives, changing actuarial or investment assumptions for the pension funds and altering collective bargaining statutes). Instead of confronting the fiscal challenges posed by sky-rocketing labor costs, the Legislature is compounding the problem with these sweeteners.

These bills range in scope, cost and purpose, but all of them change public employee pensions and health insurance, circumventing the collective bargaining process and the wishes of local elected officials. In the few cases where the bills allow local discretion, local political pressures also tend to result in the adoption of the sweeteners by local governments and school districts. While the fiscal implications of many of the bills are unstated, eight bills have first-year cost estimates of over $1 million and four would increase New York State's annual pension costs by $5 million or more. Twenty-six bills have been moving through the legislative process since the April 1st start of the fiscal year, even though the budget for the fiscal year remains unresolved.

CBC will be monitoring and reporting on the progress of these sweeteners in its second annual Benefit Sweeteners Scorecard. The following describes some of the common types of bills and highlights a few of the more egregious ones.

 

Equalization of Benefits

State and local governments offer a varied array of pension plans to employees based on when they joined the workforce and the nature of their work. One major classification of offered plans is "tier;" since current benefits cannot be changed, new tiers are created in the pension system to provide future employees with less generous pension benefits than those offered previously. Over time, the provisions of new tiers are essentially undone, as bills are passed to equalize benefits between tiers. These bills tend to be the costliest, since they typically allow employees to retire with fewer years of service or without meeting a minimum age requirement.

Assemblyman Peter Abbate and Senator Diane Savino have co-sponsored legislation that would already undo some of the concessions won just a few months ago (Tier V) to reform pensions for new State employees. Bill A.6374-A / S.5243 would allow members of the New York State and Local Police and Fire Retirement System to retire at age 55 with 30 or more years of service; currently, they must serve until age 62 to receive an undiminished benefit. The estimated annual cost of additional State contributions to the pension system needed to fund this benefit is $12.8 million.

Similarly, another bill they have sponsored, A.2645 / S.2340, would allow members of the New York State Employees Retirement System to retire without a benefit reduction upon completion of 35 years of service, regardless of age - currently, they must serve until age 62, or until age 55 with 30 years of service. Essentially, this would restore the benefits of Tier I, at a cost of $7.7 million in additional annual contributions to New York State and $9.1 million to local governments.

Another major distinction between pension plans is the determination of benefits based on type of work. Uniformed employees tend to have more generous pension plans than civilian employees, as law enforcement employees often win additional enhancements due to the hazards of their work. This creates a slippery slope, in which other uniformed and civilian employees seek to gain the same benefits. For example, A.2434-A / S.1709 provides civilian employees who are injured in the performance of their duties with retirement benefits comparable to those of uniformed employees in the Department of Correctional Services. This would add $4.3 million in additional annual employer contributions.

 

Health Insurance Diminution

Currently, retiree health benefits do not enjoy the constitutional protections afforded to pension benefits, and may be changed through bargaining. A.7060-A/ S.5543-A, introduced by Assemblywoman Ann Margaret Carrozza and Senator Savino, prohibits reduction in retiree health insurance benefits. This protection, permanently granted to State teachers last year, would be extended to other employees, greatly hampering State and local flexibility in managing labor costs.

 

Presumption of Injury

These bills extend the automatic assumption that certain ailments were incurred while on duty, allowing the affected parties to access more generous accidental disability pension benefits. One bill, A.6373-A / S.5241-A, introduced by Assemblyman Abbate and Senator Savino, presumes that the contraction of staph infections for state police and firefighters occurred in the performance of duties, allowing for retirement on a 75 percent disability pension. Similarly, A.7503 / S.4371,sponsored by Assemblyman Kenneth Lavalle and Senator Fred Theile, extends the presumption that firefighters with certain lung diseases incurred those diseases in the line of duty.

 

Health Insurance Vesting

Despite the Metropolitan Transportation Authority's severe financial crisis, one bill, A.7166 / S.4479, would saddle the MTA with additional health insurance costs. This bill, sponsored by Assemblyman Abbate and Senator Martin Dilan, would accelerate vesting for retiree health insurance benefits for MTA employees represented by District Council 37 to 10 years from 25 years. The bill has been referred to committees in both the Senate and Assembly, despite the fact that no fiscal note is attached.

 

Variable Supplement Funds

Variable supplement funds (VSF) were established separate from the pension funds to provide annual payments to New York City police and fire employees in addition to their regular pension benefits; in fiscal year 2009, this annual payment was $12,000 per retiree, with over $415 million paid in VSF benefits. (For more about VSFs, see here.) VSF payments are available only to employees that retire with service pensions, and not those who retire with more generous disability pensions. One bill introduced in this session, A.8344-A / S.614-A, would expand eligibility to those who have retired under disability. The bill also provides that payments be made to the survivors of retirees. No fiscal note was included, but the huge expansion of eligibility would likely produce a large fiscal impact. The bill is sponsored by Assemblyman Mathew Titone and Senator Andrew Lanza.

Senator Lanza, along with Assemblyman Joseph Lentol, has sponsored a related bill, A.9102-A / S.6111A, which would extend the benefit to members of the housing and transit police who retired before VSF eligibility was first granted to these departments. To fund these benefits, $88.5 million will be skimmed from pension funds of the New York City Employees Retirement System, requiring New York City to make an additional annual contributions of $11.5 million into the fund.

 

Cancer Screenings

Increasingly, the State Legislature has considered legislation granting State and local employees paid leave time to undertake screenings for cancer. One bill, A.1835 / S.3400, introduced by Assemblyman Jeffrey Dinowitz and Senator Savino, grants eight hours of paid leave for colon cancer screenings; another, A. 10066/ S.7077, sponsored by Assemblyman Abbate and Senator Savino, expands a statute passed last year covering breast cancer screenings to screenings for all forms of cancer. It also expands the hours of paid leave time from four to eight. Both bills claim that the costs will be offset by future reduced medical bills.

 

As the State, local governments and school districts buckle under the pressure of increased labor costs, it is unfathomable that the Legislature would consider adding more to the load by passing these benefit enhancements. CBC will be vigilantly monitoring the progress of these sweeteners and urging a veto by the Governor.

 

By Maria Doulis

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