July 7, 2015

by Steve Levy

Published in the Albany Times Union

Most folks I know were outraged to hear last month that a police official from a sleepy village in Nassau County was able to retire with a $1 million severance package. Unfortunately, few in Albany seem to care. The liberal rules regarding employee compensation in New York’s public sector have gotten so out of control that this retiree was able to leave employment with a $275,000 salary, and cash out of over $725,000 for unused sick and vacation days, as well as other comp pay.

The scary part is that there are thousands more just like this employee who will be retiring over the next several decades with these stratospheric retirement packages. It doesn’t take a Noble Prize economist to figure out that we are heading toward fiscal Armageddon.

The state legislature and the last few governors have talked about reforming the system but have merely nibbled around the edges by implementing new tiers to the pension system that only apply to future hires. It will take twenty-five years before we reap any appreciable results from these so called reforms. By then, our state may be bankrupt and thousands more New Yorkers will flee to more affordable pastures.

There are presently over 8,000 retirees in the state reaping annual pensions exceeding $100,000. Incredibly, there are over 90 retirees earning in excess of $200,000 yearly from the state taxpayers. Hold onto your wallets when the tens of thousands of employees hired decades ago start retiring. The system will simply implode.

When asked what they are going to do about theses million dollar retirement packages, our state leaders claim they already addressed it by creating the new tiers. What bunk! If no further changes are made, employees will continue over the next two decades to accumulate ridiculous amounts of overtime in the last three years of their employment to artificially inflate their base salaries so their pensions will be significantly higher. How else can an employee with a base salary of $85,000 retire with a pension of $110,000.

It is absolutely essential that the State Legislature put in place a reform that would eliminate overtime from being factored into pensions, even for existing employees. They have that opportunity now that a bill drafted by the Center for Cost Effective Government (in consultation with the Empire Center for Public Policy) has been introduced by Assemblyman Michael Fitzpatrick.

Some scholars look to the language of the state Constitution, which states that pension benefits “shall not be diminished or impaired” as evidence that such changes can only be effectuated via a constitutional amendment. Others maintain that the concept only applies to the more generic components of the pension. For instance, it is conceded that a change could not be made from a defined benefit to a defined contribution system for an existing employee unless there is a change to the Constitution itself. But ancillary matters, such as whether overtime or sick days can be calculated into a pension, is a different matter.

It makes sense to simply play it safe and go for the constitutional amendment itself. This is what Assemblyman Fitzpatrick’s bill does. Some say it is too difficult a task for the Legislature, yet the Legislature recently amended the Constitution by placing the issue of casino gambling up to referendum.

A second Fitzpatrick bill that deals with eliminating mandatory arbitration (that has given Long Island police salaries exceeding $200,000), modifying the Triborough Amendment (that gives automatic step salary increases even after a contract expires) and changing to a defined contribution system for future employees (rather than the present defined benefit system that provides a taxpayer guaranteed 7.5% return on the pension fund), has gotten a great deal of support from Republican Assembly members. What has been lacking, however, is any support from Republican Senators or Democratic Assembly members in the majority.

There was time when salaries in the public sector were relatively meager. The low salaries were offset by decent benefits, job security and a modest pension. But the cozy relationship between liberal politicians and the unions that provide endorsements and contributions to them have shifted the pendulum to the point where the system is simply too unfair and unsustainable for the taxpayer.

The pendulum can be swayed back to middle by the Legislature’s passing of these two bills next session. If not, 10 years down the road we will look back at the $1 million payout for that village police official and say, “Those were the good old days for taxpayers.”