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State pension reform
A sound idea from Albany

The Ithaca Journal, March 31, 2003

Finally, a common-sense fiscal plan is coming out of our state capital.

State comptroller Alan G. Hevesi is proposing a solution for revamping the state's outdated public employee pension system, whose exploding costs are wreaking havoc on the already strained budgets of New York's local governments. For example, Tompkins County's mandated contribution to the state pension program for 2003 will be about $1.3 million, compared to $365,000 in 2002. That payment could climb as high as $3 million in 2004.

The comptroller's plan addresses several issues regarding how New York's counties, cities and public schools make payments into this system. But the most important facet of this plan is a proposed mandate that public employers contribute a minimum of 4.5 percent of their payroll to the retirement system, even when the requirement dips below that level.

"His whole idea is that in order to keep some semblance of stability in contributions, you have to put a minimum payment in there. In the good times, the minimum will allow the system to build a cushion for the bad times," said Tompkins County Finance Director David Squires. Squires estimated that it would take about five years for the pension fund cushion to build to a point where it begins to stabilize the year-to-year employer contributions by counties.

Just a few years ago, the stock markets -- and hence the pension fund investments -- were producing such record earnings that the employer contributions were reduced to near zero from 1999 to 2001. Despite the common knowledge that stocks and other investments have their ups and downs, most local governments around the state did not put adequate funds aside for inevitable downturns in investment earnings. Hence, when the stock market and the national economy took a nosedive in 2001, the employer contributions to the state pension program skyrocketed and local governments were suddenly faced with the task of making up the difference.

Requiring a minimum 4.5 percent employer payment would significantly increase the state pension fund's assets. At the same time, it would dampen the volatility of employer contributions in future years. "For example, had this method been instituted in 1998, the pension fund would have collected an additional $4.8 billion in employer contributions, which would have reduced the contributions in fiscal 2003-04 by about two percentage points," according to the comptroller's office.

State legislation is required for Hevesi's plan to go into effect. Gov. Pataki, the state Assembly and the state Senate should put aside their typical bickering and approve the comptroller's proposal in a timely manner.

State pension reform A sound idea from Albany

The Ithaca Journal, March 31, 2003

State pension reform
A sound idea from Albany