GOVERNOR PATERSON SIGNS TIER V PENSION REFORM INTO LAW, ENACTING MOST SIGNIFICANT PENSION REFORM IN 25 YEARS

State of New York | Executive Chamber
David A. Paterson | Governor

For Immediate Release: December 10, 2009
Contact: Marissa Shorenstein | marissa.shorenstein@chamber.state.ny.us | 518.474.8418 | 212.681.4640

GOVERNOR PATERSON SIGNS TIER V PENSION REFORM INTO LAW, ENACTING MOST SIGNIFICANT PENSION REFORM IN 25 YEARS

Tier V to Provide More than $35 Billion in Savings for State and Local Governments Over the Next Thirty Years and Long-Term Property Tax Relief to Taxpayers;

Widespread, Statewide Support Hails Reform Measure for Reigning in Costs to Government;

To See How Much Your Municipality Will Save, Use Tier V Pension Reform Savings Calculator at https://www.budget.state.ny.us/pensionReform.html

Governor David A. Paterson today signed into law pension reform legislation that will provide more than $35 billion in long-term savings to New York taxpayers over the next thirty years. The legislation creates a new Tier V pension level, the most significant reform of the State’s pension system in more than a quarter-century. Governor Paterson first proposed a new pension tier in his 2009-10 Executive Budget, and it was a core recommendation of the Commission on Property Tax Relief, which was chaired by Nassau County Executive Thomas R. Suozzi.

“In order to get our fiscal house in order, Albany must make fundamental reforms to the way it spends money. Tier V is the first substantive pension reform in a quarter century, and is another critical step toward making our government more accountable to taxpayers,” Governor Paterson said. “The savings this reform achieves will help to lower property taxes by reducing not only State spending, but local spending as well.”

According to a Division of the Budget analysis, Tier V pension reform will achieve more than $35 billion in savings for state and local governments over the next thirty years. To see how much your municipality will save, use the “Tier V Pension Reform Savings Calculator,” which is accessible at the following link: https://www.budget.state.ny.us/pensionReform.html. A region-by-region breakdown of local government savings across the State is also included below.

From the start of economic downturn, Governor Paterson has worked to achieve pension reform that would ease the burden on State and local governments and provide relief to New York’s property taxpayers. On June 5, Governor Paterson announced an agreement with the Civil Service Employees Association (CSEA) and the Public Employees Federation (PEF) that achieved immediate workforce savings while avoiding large scale layoffs, in addition to securing support from the two unions for the Governor’s efforts to implement Tier V pension reform.

Key components of Tier V include:

    • Raising the minimum age at which most civilians can retire without penalty from 55 to 62 and imposing a penalty of up to 38 percent for any civilian who retires prior to age 62.
    • Requiring employees to continue contributing 3 percent of their salaries toward pension costs so long as they accumulate additional pension credits.
    • Increasing the minimum years of service required to draw a pension from 5 years to 10 years.
    • Capping the amount of overtime that can be considered in the calculation of pension benefits for civilians at $15,000 per year, and for police and firefighters at 15 percent of non-overtime wages.

Members of the NYS Teachers Retirement System will have a separate Tier V benefit structure that will achieve equivalent savings as other civilian public employees. It includes:

    • Raising the minimum age an individual can retire without penalty from 55 to 57 years.
    • Contributing 3.5 percent of their annual wages to pension costs rather than 3.0 percent and continuing this increased contribution so long as they accumulate additional pension credits.
    • Increasing the 2 percent multiplier threshold for final pension calculations from 20 to 25 years.

In accordance with constitutional requirements, these new pension reforms would apply only to public employees hired in the future. These provisions will apply to the State workforce and to employees of localities outside New York City. In addition, the bill will implement an agreement between Mayor Bloomberg and the United Federation of Teachers (UFT) to enact reform of their pensions, which will result in estimated annual savings of $19.1 million in 2010, increasing to $64.1 million in 2019.

On June 2, Governor Paterson vetoed a bill that would have provided Tier II benefits to all new police officers and firefighters, matching the benefits of current employees at a significant cost to local governments. The “temporary” bill had been extended on a bi-annual basis since 1981. In his veto message for Senate Bill 1409, Governor Paterson stated that while this legislation had been routinely extended in the past, “these are not routine times.” In particular, the message noted a report from State Comptroller Thomas DiNapoli that the pension system lost 26 percent of its value in the last fiscal year, which will necessitate higher pension costs for the State and localities. The Tier V bill enacted today does not explicitly affect newly hired New York City police officers and firefighters. However, the Governor’s veto of Senate Bill 1409 placed all such employees into a new tier containing many reforms that will result in significant long term savings to New York City.

A region-by-region breakdown of projected Tier V pension reform savings outside New York City is available below. These savings are in addition to the cost-reductions that will be achieved over the next thirty years at the state government level ($8.4 billion) and by government entities that serve multiple regions ($1.6 billion).

Western New York – $2.8 billion in savings over the next thirty years.
Rochester/Finger Lakes Region – $2.5 billion in savings over the next thirty years.
Southern Tier – $936 million in savings over the next thirty years.
Central New York – $2.1 billion in savings over the next thirty years.
North Country – $1.0 billion in savings over the next thirty years.
Capital District – $2.0 billion in savings over the next thirty years.
Hudson Valley – $6.4 billion in savings over the next thirty years.
Long Island – $8.5 billion in savings over the next thirty years.
For more information about Governor Paterson’s efforts on fiscal and budgetary reform, please visit the Governor’s Office of Taxpayer Accountability website at www.taxpayer.ny.gov.
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The following quotes were provided in support of Tier V Pension Reform:

Senate President Pro Tempore Malcolm A. Smith said, “The Tier V reforms are a vital step in creating economic stability. By placing our pension system on a sustainable path, we are saving taxpayers billions of dollars and securing the future for police, firefighters, teachers and hard-working civil servants throughout the state. I would like to thank Governor Paterson for his dedication to this necessary reform.”

Assembly Speaker Sheldon Silver said: “With our economy in the early stages of recovery, this new, cost-effective Tier V pension reform comes at a crucial time for New York State. This restructuring of retirement systems will continue to provide new public employees with sound pension benefits while saving the state billions. On behalf of taxpayers and local governments across New York who are already stretched thin, I commend all of those who worked together to make Tier V a reality this year.”

Senator Craig M. Johnson said: “Tier V will provide much-needed structural changes that will put state and local governments on a path towards controlling skyrocketing pension costs. The governor and legislative leaders should be commended for making this vital, and frankly long-overdue, legislation a reality.”

Senator and Senate Education Committee member Brian X. Foley said: “Now, more than ever, we must work together to protect taxpayer money and reduce costs. I am pleased to support Tier V Pension Reform because it will help bring New York State’s fiscal house in order. The passage of this important measure will fundamentally reform the pension structure and help taxpayers and schools throughout our state.”

Assemblyman Peter J. Abbate, Jr. said: “The creation of a Tier V designation addresses long standing concerns about the well-being of the public employee pension system. This new law will continue to provide new public employees, including police officers, teachers, emergency services personnel and other civil servants with access to a quality and stable pension system while addressing the state’s long-term fiscal concerns.”

Assemblyman Michael J. Fitzpatrick said: “The new Tier V will help all municipalities save on their future pension costs, while in the eyes of some it is a small step, it is an important and necessary step nonetheless.”

Assemblyman Charles Lavine said: “Essential to New York’s long term economic strength, this important legislation will save our taxpayers a staggering $50 billion over the course of the next 30 years while at the same time providing our employees with the security necessary to maintain a dedicated workforce. I am pleased to support this vital and sensible legislation and would like to thank Governor Paterson for his continued leadership.”

Assemblyman Tom McKevitt said: “This legislation is a start in the right direction to help the State and local governments achieve significant long term savings in their pension costs. Providing savings to the State’s pension system is essential to safeguard the futures of not only current and future retirees, but for all taxpayers as well.”

Assemblywoman Michelle Schimel said: “Tier V legislation addresses one of the most significant cost drivers in local and state budgets. I am pleased that Governor Paterson can sign this pension reform bill into law on my watch and in my own Town of North Hempstead.”

Assemblyman Fred W. Thiele, Jr. said: “These are trying times. New York is currently facing a $3.9 billion budget deficit. This legislation tackles the core problems within the pension system while providing much-needed relief to taxpayers. New York holds the service of its police officers, firefighters, teachers, and public servants in the highest regard and they deserve to have strong pension benefits upon retirement. However, during trying economic times it’s important that we address the state’s costly pension system. The Tier V pension legislation is a sensible measure that will significantly reduce taxpayer costs over time.”

Kenneth Adams, President and CEO, The Business Council of New York State, Inc, said: “We applaud Governor David A. Paterson’s leadership in creating a new public employee pension tier to lower the pension costs for new hires. This is an important step to reduce long term government costs at the state and local level, and is something The Business Council has supported. We must reduce the cost of government to allow our economy to grow.”

President of The Citizens Budget Commission (CBC) Carol Kellermann said: “Rapidly rising pension costs represent a major fiscal challenge for state and local governments in New York. Local contributions are expected to rise by 60 percent in the coming year. Today Legislators moved to help counteract the mounting pressure on state and local budgets by putting a new and less costly benefit plan in place for new public employees. Future savings resulting from the new benefit plan will, over the long run, amount to tens of billions of dollars. The legislation--a compromise package developed with the participation of labor, management, legislative leaders, and the Governor--represents a key step forward for New York State in its efforts to improve its ability to spend within its means. The CBC congratulates all parties to the negotiation and supports its adoption into law.”

Onondaga County Comptroller Robert E. Antonacci II said: “The taxpayers of this State are in desperate need of tax relief and the signing of this legislation is a step in the right direction of reforming some of the inefficiencies with the current pension system. I applaud Governor Paterson for signing the Tier V reform bill into law.”

Monroe County Executive Maggie Brooks said: “I applaud Governor Paterson and the State Legislature for their successful reform of the State pension system with the creation of Tier V. This reform will reduce the cost of this mandated program for local governments, generating real long-term savings for property taxpayers. Monroe County is proud to partner with Governor Paterson in his efforts to reduce the size and cost of government in the interest of protecting overburdened taxpayers.”

Broome County Executive Barbara Fiala said: “This is a significant step in bringing costs under control while still providing fair and equitable retirement benefits for our government workers. I applaud Governor Paterson and our legislators for recognizing that something needed to be done to contain costs going forward. This reform will help state and local governments to control future costs for all of our taxpayers.”

Suffolk County Executive Steve Levy said: “We thank Governor Paterson for including this measure in the recent deficit-reduction plan. The creation of a new tier is a long-term, protective measure for our taxpayers. Local governments have long sought the ability to curb some of these benefits that are unsustainable.”

Oneida County Executive Anthony J. Picente, Jr. said: “I would like to congratulate Governor Paterson on the passage of his pension reform bill which will save State and local governments millions in taxpayer dollars. I appreciate the Governor’s steps to reduce government costs while keeping local governments in mind and not forcing the financial burden onto them. This Tier V pension program will help to provide Counties much needed financial relief in the years to come.”

Jonathan Rouis, Chairman of the Sullivan County Legislature, said: “I applaud Governor Paterson’s efforts to bring structural changes to the pension system, which will positively impact the fiscal health of our state government, and local municipalities.”

Tom Santulli, Chemung County Executive and President of the New York State Association of Counties, said: “This new pension tier will bring fiscal relief to property taxpayers over the long term. It is a step in the right direction for lowering the cost of government. Without this reform, our payroll costs would have continued to rise at an unsustainable rate.”

Westchester County Executive Andy Spano said: “We have supported this kind of pension reform for a number of years as an important part of our efforts to control property taxes. I thank Governor Paterson for recognizing this and providing the leadership to get it done.”

Thomas R. Suozzi, Nassau County Executive and Chairman of the NYS Commission on Property Tax Relief, said: “I commend the Governor and the state Legislature for implementing a Tier V pension reform, a reform I have been fighting for since I started Fix Albany in 2004. The Commission on Property Tax Relief heard from school districts from across the state that a Tier V could have a positive impact over their expense growth. Tier V was one of over thirty recommendations of the Commission to change state law in order to reduce costs for school districts. This is a significant first step and I will continue to fight for changes to benefit our residents suffering from unsustainable property taxes.”

Herkimer County Administrator James Wallace said: “On behalf of the taxpayers of Herkimer County a thank you for the common sense effort to create a new Tier V. We thank Governor Paterson for his leadership on this issue and the legislature for their support. This does not hurt any current employee in the system but will help Herkimer County’s budget in the near and long term.”

Oswego Mayor Randolph Bateman said: “The State Legislature’s recent passage of Governor David A. Paterson’s landmark pension reform bill will go a long way toward reducing taxes. By the creation of a new Tier V pension level, the reduction in pension costs will provide cities with a reduction in their municipal expenses, thereby providing a savings to all our taxpayers.”

Buffalo Mayor Byron W. Brown said: “I applaud the state legislature for passing this bill and commend Governor Paterson for signing it, which will lead to significant cost savings for our state’s residents for years to come.”

Rochester Mayor Robert Duffy said: “I applaud Governor Paterson for having the courage of his convictions and for recognizing that government is a business and must start operating like one. This fundamental reform of the public sector pension system -- that actually only impacts new employees -- achieves what the private sector has been doing for years – namely, having employees contribute a fair share towards their pensions. With one step, the Governor has saved the City of Rochester from a crippling increase in pension costs that would have required layoffs of existing City workers.”

Rensselaer Mayor Daniel J. Dwyer said: “We are pleased to hear the Governor is taking positive steps to reduce the cost of operating City government and thus reducing the burden on City taxpayers.”

Peekskill Mayor Mary Foster said: “I applaud the Governor’s efforts to reform the NYS Pension System. We now need safeguards to be established that require periodic independent reviews of the benefits established in the most recent Pension Tiers against future economic conditions so that future changes can be implemented more expeditiously. Twenty five years between reform initiatives is too long. In addition, future reform changes will need to be able to affect non-vested employees.”

Hornell Mayor Shawn D. Hogan said: “Passage of the Tier V pension bill is certainly a step in the right direction. Hopefully it’s just the beginning of enacting necessary changes to bring fiscal stability to our state, particularly in these difficult economic times.”

Norwich Mayor Joseph P. Maiurano said: “This is a step in the right direction that will benefit us in the future and I commend the Governor for his leadership.”

Watervliet Mayor Mike Manning said: “Now, more than ever, local governments are stretched financially and in Watervliet we are planning yearly but also for the long term. Tier V will have far reaching impacts on cities like ours and I commend the Governor for his work on this historic change.”

Cohoes Mayor John T. McDonald III said: “The passage of the Tier V Pension Bill is a positive step in the right direction to assist local governments in regards to controlling costs. Pension Bills have for the last decade that I have served in office been by far one of the most unpredictable and rapidly rising costs that local governments have little control over. Reform, sorely needed, will hopefully reverse that trend going forward as local governments such as Cohoes need to have reliable and predictable costs year over year to allow us to continue to provide the services our residents have come to enjoy and expect.”

Port Chester Mayor Dennis Pilla said: “Many local elected officials and the NY Conference of Mayors (NYCOM) have been pushing the State Legislature for Tier 5 pension reform for many years. Thanks to Governor Paterson’s strong and proactive leadership, we now have pension reform that will reduce state expenses as well as local property taxes. This is a ‘win-win’ outcome for all New York taxpayers.”

Auburn Mayor Mike Quill said: “The Tier V Pension plan will help the city of Auburn and other similar size municipalities save a large amount of money in the coming years. For all municipalities one of the largest costs we face is pension for our employees. We want to do what’s right for our employees and at the same time we are mandated to do what is best for our taxpayers. With the advent of Tier V it will help us to do both.”

Utica Mayor David Roefaro said: “The Governor is leading the way with real and progressive pension reform. One of the most difficult challenges facing mayors across New York stems from the unfunded mandates of the pension system. We have a long way to go with this effort, but I’m pleased to commend Governor Paterson for taking the first step, the first real step in over twenty years.”

Binghamton City Mayor Matt Ryan said: “The Tier V pension level is crucial to reducing the financial pressures now felt by municipalities and citizens. I applaud Governor Paterson for spearheading these long needed reforms, and I thank the Legislature for their support.”

North Tonawanda Mayor Lawrence V. Soos said: “I am glad to hear that the State Legislature has finally followed your lead and passed Program Bill No. 213 creating a new Tier V pension level for newly hired non-uniformed public sector employees which should be correctly recognized as a historic first step towards a very significant cost savings item to the State of New York and to my own local municipality. In my opinion, for far too long the leadership of New York State government has either looked the other way, or has not had the fortitude, to enact legislation that would put the brakes on the ever increasing costs of public employee retirement benefits that severely impact a local municipality, such as the City of North Tonawanda. Bravo to you Governor Paterson for pushing the issue and for making the State legislature see the light! The next step is for the State Legislature to join with you to address the pension costs for new uniformed employees that in my opinion pose even more of a financial burden on the State and local municipalities. Keep up the good work. Times are tough, and tough decisions have to be made. Thank you.”

Kingston Mayor James Sottile said: “I would like to add my support to Governor Paterson’s Landmark Pension Reform. The Governor through his leadership has addressed a very important issue, pension reform that will have a profound impact to local governments. For many years state government has talked about pension reform, Governor Paterson has stepped forward and has accomplished pension reform. This pension reform will have a positive impact on many local and state budgets to come in the future. The Governor sees the big picture and knows how important this legislation is to local communities. By taking on this issue the Governor has proven he is a visionary and understands what many local governments are facing. I applaud his leadership.”

Schenectady Mayor Brian U. Stratton said: “I applaud Governor Paterson on working with our public employee unions and the Legislature to achieve a new Tier 5 addition for the New York State Retirement System. The addition of a Tier 5 level not only provides the opportunity for the State to realize considerable savings, which is good for New York and the City of Schenectady, but also maintains a sound retirement and pension plan for our hard-working public employees.”

Amsterdam Mayor Ann Thane said: “Governor Paterson recognized early on in the economic downturn that we would need to take drastic steps to ease the ever growing burden on tax-payers. This legislation will help reduce future costs and the Governor shows great leadership in attempting to lower property taxes which is one of the biggest costs for my constituents.”

Lockport Mayor Michael W. Tucker said: “The new Tier V legislation will help ease the burden on communities like The City of Lockport and across the State of New York. In particular, the elimination of Christmas Bonuses and the dropping of overtime in calculating benefits will translate into huge saving for our communities.”

Mt. Vernon Mayor Clinton I. Young, Jr. said: “I have seen over the years, this year especially, the increasing costs of the state and local pension system. In preparing our annual budget we experienced a $2 million increase in pension costs. I applaud the Governor for taking bold steps toward ensuring the financial stability of the state and reducing the tax burden on our citizens. We in Mount Vernon look forward to the positive impact of these changes.”

Syracuse City Auditor Philip J. LaTessa said: “The Governor’s leadership on the passage of Tier V legislation clearly demonstrates his commitment to fostering a sound financial environment for the New York State. This legislation alone goes a long way in reducing New York State’s spending. It does so not with a typical ‘one shot’ reduction, but with a strong long term sustainable reduction of future expenses that will only benefit the tax payers of New York”

Dr. John A. D’Ambrosio, Orange County Chamber of Commerce President, said: “The Chamber supports the Tier V section of the Governor’s Deficit Reduction Plan. It’s gratifying to see that the state is thinking more like a business. All of our businesses have been forced to make cuts in their benefit packages as a result of the difficult economy, so it’s appropriate that the state do so as well.”

Marsha Gordon, President and CEO of The Business Council of Westchester, said: “The new Tier V system is a good first step in reforming the public employee pension system. We have been an advocate for this reform which was long overdue and will generate long-term savings for property taxpayers.”

Ken Kamlet, Chair of Leg Committee of Greater Binghamton Chamber of Commerce, said: “The Tier 5 initiative by the Governor was a giant step forward.”

Darlene D. Kerr, President of the Greater Syracuse Chamber of Commerce, said: “Creation of a new Tier V for incoming public employees will go a long way in helping not just the State, but local governments and school districts as well, move towards a more sustainable fiscal future. Unlike many other budget actions, this one will increasingly reduce the cost of government at all levels. From the business community’s perspective and on behalf of taxpayers, we thank Governor Paterson and the Legislature for making this a reality.”

Ann Meagher, President and CEO, Greater Southern Dutchess Chamber of Commerce said: “I applaud the courage and the leadership of Governor Paterson as he has been able to accomplish a long standing priority of many leaders in local Government, the Tier V pension plan will save New York Taxpayers Billions over the next 30 years. This is a tremendous step in the right direction in reducing the burden of public employee pension costs. I give the Governor two thumbs up.”

Al Samuels, President and CEO of the Rockland Business Association said: “The Rockland Business Association applauds all attempts to reduce the cost of government in New York. We take special note of Governor Paterson’s leadership in bringing a new tier to the pension system that will save billions of dollars in years to come. The generosity of the past must be tempered with the realities of the present and other such actions still need to be adopted. We look forward to the opportunity to support the Governor in further attempts to bring down the cost of doing business in our state.”

Lou Santoni, President and CEO of the Greater Binghamton Chamber of Commerce, said: “The Greater Binghamton business community applauds Governor Paterson for his willingness to take on the issues that others before him have not. However, we urge support for legislation that brings about real, sustainable reform to the State’s pension system. The Governor has recognized the need to put everything on the table to deal with our current fiscal crisis. The continuation of an inequitable public employees’ pension fund will only increase the burden on local governments and ultimately the taxpayer. Tier V reform is an essential first step toward real reform. We encourage him to be bold in his efforts.”

Ward Todd, President of the Ulster County Chamber of Commerce, said: “Governor Paterson and the state legislature are to be commended for passing the Tier V Pension Reform Bill, a measure that will have a clear and dramatic impact on untold future generations of New York State taxpayers. This pension reform is long overdue. I firmly believe that extraordinary times can create extraordinary opportunities. I congratulate our lawmakers for seizing this opportunity and taking this decisive action to slow the spiraling cost of public employee pensions in New York State.”

Town of Plattsburgh Supervisor Bernie Bassett said: “With this long-awaited reform to the pension system, Governor Paterson is reducing the cost of local government. This reform will provide a savings to the Town of Plattsburgh and will encourage future economic development by enabling us to hire the essential staff needed to keep up with a growing community.”
Clarkstown Supervisor Alexander J. Gromack said: “I commend Governor Paterson for this innovative legislation and his efforts to make much needed changes to New York’s pension system. Local municipalities, including Town’s like Clarkstown, contribute millions of dollars each year to increasing pensions costs. Governor Paterson is taking a big step in the right direction for all taxpayers of New York.”
Warwick Town Supervisor Mike Sweeton said: “Anything the governor can do to reduce the burden of increasing retirement costs to local governments is to be applauded.”

Ardsley Village Manager George F. Calvi said: “Thank you Governor! The passage of legislation creating a new Tier V for the Employee Retirement System (ERS) has been a long time in coming. Implementation of this new tier will eventually save local municipalities like Ardsley thousands of dollars with minimal impact on future employees while maintaining one of the best public sector pension plans in the country.”

Executive Director of the Association of Towns Jeffrey Haber said: “The Association of Towns applauds Governor Paterson’s actions in proposing and enacting Tier V. For the first time in decades, legislation could actually reduce current local pension bills, and will definitely provide significant long term savings and property tax relief. This is the kind of relief that localities throughout the State need.”

Dr. Jessica Cohen, Superintendent of the Onondaga Madison Cortland Boces (OCM Boces), said: “Last week’s approval of pension reform through the creation of a Tier V is a welcome change for school boards and superintendents who have been struggling with the costs of employee pensions. It will help districts in the future as new employees enter the system.”

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