Public employees in New York State {outside New York City} join one of three pension systems, depending on their occupation. One pension system is dedicated to teachers, another is for employees of police and fire departments, and the last is for all other public employees.

State and local governments and employees contribute to these systems to pay the cost of providing pensions, and the State Constitution protects the rights of employees to the pension benefits in effect during their employment. New York State’s pension funds are well‐ funded; unlike in some other states, New York taxpayers have continued to pay into public pension funds even during times of fiscal stress to ensure that future State and local retirees will receive their benefits.

This fiscal responsibility has come at an extremely high cost: employer pension contributions have increased sharply over the past decade due to the poor market performance of investments, continual “sweetening” of relatively generous benefits, and reduced contribution requirements for public employees. The trend is projected to continue into the future.

In addition, costs for retiree health insurance are escalating rapidly as well. These costs are not funded on an actuarial basis like pensions, but are paid as incurred from the annual operating budget. As a result, many states have unfunded actuarial liabilities worth tens of billions of dollars; in New York, the State liability for retiree health insurance and other benefits totals $55.9 billion.

Local governments have been similarly strained by rising pension and retiree health care costs. New Yorkers should understand the reasons behind these trends so that they can participate in an informed way in the discussions about how to reform the system.