Tuesday, December 23, 2008

Municipal Pension Reform is Coming...

There seems there’s just no getting around it - pension reform is coming to the public sector. In the midst of the current economic crisis, that’s a virtual given.

In a recent Op-Ed New York City’s Mayor, Mike Bloomberg wrote, “...right now, New York City is spending so much money on pensions - $6.3 billion, a 10-fold increase from the $695 million we spent in 2000 - that we have far less to spend on core services, such as public safety, education, parks and senior centers. That defies common sense, and it's hurting our city.”

He notes that, “For instance, the city now has to spend more money on pensions and fringe benefits for firefighters than we pay in salaries for firefighters.”

Mayor Bloomberg is hawking NY Governor David Patterson’s current proposal, which the Bloomberg administration helped craft and now strongly supports, which Mayor Bloomberg claims would create immediate savings that would reach $540 million annually after 20 years. The Patterson proposal comes in two parts;

“The first part would eliminate for future employees two pension sweeteners that the state enacted during the boom years of the last decade. One sweetener allows employees to stop contributing to their pensions after 10 years of service; the other expands pension eligibility by reducing the required number of years of city service from 10 to five. Together, they have cost the city and state $1.8 billion since 2000.”

The second part of the governor's plan would modernize a pension system that hasn't been updated in 25 years and no longer makes sense, given longer life expectancies. Right now, uniformed city workers can retire after only 20 years of service. That means government is paying full pension benefits to many people whose retirements begin in their early 40s (although most continue working full-time in other jobs) and stretch for more than 40 years.

I believe that - again, only for future hires - we should raise the number of years required for a full pension for uniformed workers from 20 to 25, and provide retirement benefits to these future employees only after they reach 50.

Mayor Bloomberg brings up the specter of bankruptcy that plagued the City during the 1970s. “New York City can't continue to offer the next generation of workers gold-plated pension benefits that even the most successful companies can't afford today.

“The Big Three automakers offer some of the best pension plans in the private sector, yet even they cannot match the generosity of New York state government. And Detroit's expensive pension plans are part of the reason why the automakers are teetering on bankruptcy and pleading for a bailout in Washington.

“New York went down that road in the 1970s, and we can't afford to go back.

“Back then, thankfully, city and state leaders came together to deal with the structural causes of the fiscal crisis, adopting long-term measures to address them, including pension reforms.”

Is pension reform/modification coming to New York and other Municipalities across the country?

It certainly appears so.

One thing we can be sure of is that Municipal workers will be looking at whether or not the politicians (government workers) who enact these reforms, reform/scale-backs of their own pension programs, as well.

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