By now, most are aware that factoring overtime into public sector pensions is crushing taxpayers, but few have calculated how devastating this impact will be over the next two decades, as hundreds of thousands of current employees prepare to retire. A report issued by the Center for Cost Effective Governance brings those devastating numbers to the forefront.
Unless the state Legislature changes the law allowing overtime to be factored into pensions, New York taxpayers will be on the hook for over $50 billion over the next 20 years, just to pay for the parts of these pensions that are enhanced by the overtime inclusion. That figure leaps to an astounding $84 billion when adjusted for inflation.
Stated another way, if Albany would simply pass a reform eliminating overtime from pension calculations, taxpayers could save up to $84 billion. That’s more than one and a half times the MTA’s capital budget plan.
By now, most are aware that factoring overtime into public sector pensions is crushing taxpayers, but few have calculated how devastating this impact will be over the next two decades, as hundreds of thousands of current employees prepare to retire. A report issued by the Center for Cost Effective Governance brings those devastating numbers to the forefront.
Unless the state Legislature changes the law allowing overtime to be factored into pensions, New York taxpayers will be on the hook for over $50 billion over the next 20 years, just to pay for the parts of these pensions that are enhanced by the overtime inclusion. That figure leaps to an astounding $84 billion when adjusted for inflation.
Stated another way, if Albany would simply pass a reform eliminating overtime from pension calculations, taxpayers could save up to $84 billion. That’s more than one and a half times the MTA’s capital budget plan.
We’ve all heard the horror stories. The most recent was the Empire Center’s exposé of a Long Island Rail Road employee earning $344,000 in overtime in his last year to inflate his annual pension to a whopping $162,000.
And earlier this year, the New York Post reported that a Nassau police officer earned $85,000 in overtime to wind up with a $179,000 pension.
As far back as 2010, The New York Times reported that more than 100 police and fire pensioners in Yonkers were earning more in retirement than they were as active officers because overtime jacked up their final salaries.
Almost a decade ago, Albany enacted a new Tier 6 retirement category that would limit overtime being factored into pensions to no more than 15 percent of base pay. Sounds good, but, unfortunately, we won’t see any savings for a couple of decades, since it only applies to employees hired after April 2012.
More than two-thirds of current employees in the State Employee Retirement System and 74 percent of those in the Police and Fire Retirement System were hired before that date and will continue to have overtime inflate their pensions. If this trend continues, we may be bankrupt before we see the first dime of savings from the Tier 6 reform.
We examined Nassau County police officers who retired in January 2018. We listed their base pay, the overtime they earned in 2017 — which averaged $37,000 — and their final pensions.
Employees generally receive pensions that are 50 to 60 percent of their highest average three-year earnings. Police officers and firefighters on disability pensions — and there are lots of them — will receive 75 percent.
To be conservative, our center assumed each individual would retire at just 50 percent of their averages. That equates to an annual $2.4 million cost for just one graduating class of 130 officers. But the average lifespan for these officers retiring at 55 is 25 years, and more if they retire after just 20 years.
Over the lifetimes of these retirees, taxpayers will incur an additional $60 million, just because overtime was included in these calculations. But remember, there will be 25 more classes of retirees over that span that will amount to a jaw-dropping $783 million — not including wage inflation or the annual raises tied to the CPI once the employee retires.
We did the same calculations for police officers and firefighters outside New York City. The retirement of these 34,000 active members will result in an additional burden of $5.1 billion over the next 20 years.
And there are still more than 600,000 active employees within the state retirement system outside of police and fire employees, or the teaching profession. Then there are more than 200,000 non-uniformed New York City employees. Figures provided by the Empire Center note an annual average overtime of $11,599 per individual approaching retirement. This seems small, but when half of that amount is added to such a large number of pensions, the additional burden over 20 years will balloon to $5.78 billion for the city retirees and $24.8 billion for state system.
The extra pension costs attributable to overtime for other New York City departments over the next 20 years were also analyzed: Police ($6.74 billion), fire ($1.05 billion), sanitation ($567 million), corrections ($3.15 billion) and the Port Authority ($888 million). The cost for the MTA would be $5.69 billion.
The total cost for all employees, including others not listed above, due to overtime being factored into their pensions, amounts to an inflation adjusted $83.9 billion.
This taxpayer obligation can be eliminated if state legislators pass resolution A5361, introduced by Assemblyman Michael Fitzpatrick, R-St. James. Scholars are divided as to whether a constitutional amendment would be needed to enact this reform for present employees, but even if it were, Fitzpatrick has a companion bill that would amend the Constitution, erasing any doubt.
Officials hesitant to alter the system must remember that reforms will help ensure that the pension fund remains viable for future retirees. We already know what failure to act will lead to. Just look back to the municipal bankruptcies in Detroit and San Bernardino. The time to act is now.
NY pols keep digging the state’s pension hole deeper
January 23, 2020How Creeping Taxes Are Destroying Long Island
January 27, 2020By now, most are aware that factoring overtime into public sector pensions is crushing taxpayers, but few have calculated how devastating this impact will be over the next two decades, as hundreds of thousands of current employees prepare to retire. A report issued by the Center for Cost Effective Governance brings those devastating numbers to the forefront.
Unless the state Legislature changes the law allowing overtime to be factored into pensions, New York taxpayers will be on the hook for over $50 billion over the next 20 years, just to pay for the parts of these pensions that are enhanced by the overtime inclusion. That figure leaps to an astounding $84 billion when adjusted for inflation.
Stated another way, if Albany would simply pass a reform eliminating overtime from pension calculations, taxpayers could save up to $84 billion. That’s more than one and a half times the MTA’s capital budget plan.
By now, most are aware that factoring overtime into public sector pensions is crushing taxpayers, but few have calculated how devastating this impact will be over the next two decades, as hundreds of thousands of current employees prepare to retire. A report issued by the Center for Cost Effective Governance brings those devastating numbers to the forefront.
Unless the state Legislature changes the law allowing overtime to be factored into pensions, New York taxpayers will be on the hook for over $50 billion over the next 20 years, just to pay for the parts of these pensions that are enhanced by the overtime inclusion. That figure leaps to an astounding $84 billion when adjusted for inflation.
Stated another way, if Albany would simply pass a reform eliminating overtime from pension calculations, taxpayers could save up to $84 billion. That’s more than one and a half times the MTA’s capital budget plan.
We’ve all heard the horror stories. The most recent was the Empire Center’s exposé of a Long Island Rail Road employee earning $344,000 in overtime in his last year to inflate his annual pension to a whopping $162,000.
And earlier this year, the New York Post reported that a Nassau police officer earned $85,000 in overtime to wind up with a $179,000 pension.
As far back as 2010, The New York Times reported that more than 100 police and fire pensioners in Yonkers were earning more in retirement than they were as active officers because overtime jacked up their final salaries.
Almost a decade ago, Albany enacted a new Tier 6 retirement category that would limit overtime being factored into pensions to no more than 15 percent of base pay. Sounds good, but, unfortunately, we won’t see any savings for a couple of decades, since it only applies to employees hired after April 2012.
More than two-thirds of current employees in the State Employee Retirement System and 74 percent of those in the Police and Fire Retirement System were hired before that date and will continue to have overtime inflate their pensions. If this trend continues, we may be bankrupt before we see the first dime of savings from the Tier 6 reform.
We examined Nassau County police officers who retired in January 2018. We listed their base pay, the overtime they earned in 2017 — which averaged $37,000 — and their final pensions.
Employees generally receive pensions that are 50 to 60 percent of their highest average three-year earnings. Police officers and firefighters on disability pensions — and there are lots of them — will receive 75 percent.
To be conservative, our center assumed each individual would retire at just 50 percent of their averages. That equates to an annual $2.4 million cost for just one graduating class of 130 officers. But the average lifespan for these officers retiring at 55 is 25 years, and more if they retire after just 20 years.
Over the lifetimes of these retirees, taxpayers will incur an additional $60 million, just because overtime was included in these calculations. But remember, there will be 25 more classes of retirees over that span that will amount to a jaw-dropping $783 million — not including wage inflation or the annual raises tied to the CPI once the employee retires.
We did the same calculations for police officers and firefighters outside New York City. The retirement of these 34,000 active members will result in an additional burden of $5.1 billion over the next 20 years.
And there are still more than 600,000 active employees within the state retirement system outside of police and fire employees, or the teaching profession. Then there are more than 200,000 non-uniformed New York City employees. Figures provided by the Empire Center note an annual average overtime of $11,599 per individual approaching retirement. This seems small, but when half of that amount is added to such a large number of pensions, the additional burden over 20 years will balloon to $5.78 billion for the city retirees and $24.8 billion for state system.
The extra pension costs attributable to overtime for other New York City departments over the next 20 years were also analyzed: Police ($6.74 billion), fire ($1.05 billion), sanitation ($567 million), corrections ($3.15 billion) and the Port Authority ($888 million). The cost for the MTA would be $5.69 billion.
The total cost for all employees, including others not listed above, due to overtime being factored into their pensions, amounts to an inflation adjusted $83.9 billion.
This taxpayer obligation can be eliminated if state legislators pass resolution A5361, introduced by Assemblyman Michael Fitzpatrick, R-St. James. Scholars are divided as to whether a constitutional amendment would be needed to enact this reform for present employees, but even if it were, Fitzpatrick has a companion bill that would amend the Constitution, erasing any doubt.
Officials hesitant to alter the system must remember that reforms will help ensure that the pension fund remains viable for future retirees. We already know what failure to act will lead to. Just look back to the municipal bankruptcies in Detroit and San Bernardino. The time to act is now.
@SteveLevyNY
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