The soaring cost of New York State's public pension systems can be permanently controlled by shifting to the sort of employer-subsidized individual retirement plans now popular in the private sector, according to an updated study of the state's pension structure by the Empire Center for New York State Policy.

The study -- "Defusing New York's Pension Bomb: A Fair Approach for Workers and Taxpayers" -- documents a $5.6 billion increase in tax-funded contributions to the retirement funds for public workers over the past five years.

"The pension problem is not simply a function of the 2000-03 stock-market slump or Albany's increases in pension benefits six years ago -- although both helped precipitate the latest crisis," the study says. "The real cause is the fundamental design of the pension system itself, which obscures costs and wreaks havoc on long-term financial planning."

Government employees are entitled to guaranteed annual-retirement income based on years of service and final average salary. Payments are financed out of common pension trust funds invested mainly in stocks and bonds. The Empire Center study -- by E.J. McMahon, the center's director -- says the system could be made "more transparent, predictable and controllable" by providing future employees with their own retirement accounts, such as the 401(k).

"By acting now to reform government pensions in a way that protects the interests of both employers and employees, farsighted public officials can make real progress in bringing these costs permanently under control before another generation of New Yorkers is forced to wrestle with the consequences," says the study -- which also outlines an alternative plan for a defined-contribution retirement program in New York.

The Empire Center is a project of the Manhattan Institute, a non-partisan research organization that is one of the nation's premier think tanks.

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