Contact: Tim Hoefer
Taxpayer-funded employer contributions to public pensions in New York State will rise by billions of dollars in the next few years, threatening to divert scarce resources from other essential public services in the midst of a fiscal crisis, according to a report issued today by the Empire Center for Public Policy.
The report, “New York’s Exploding Pensions Costs,” forecasts pension funding trends for the New York State and Local Retirement Systems (NYSLRS) and the New York State Teachers Retirement System (NYSTRS), which cover nearly every public employee outside New York City. It also summarizes official reports of funded status and projected costs over the next three years for the New York City Retirement Systems.
Taxpayer contributions to NYSTRS could more than quadruple, rising from about $900 million as of 2010-11 to about $4.5 billion by 2015-16. The projected increase is equivalent to an annual property tax hike of 3.5 percent a year, well above Governor-elect Andrew Cuomo’s proposed property tax cap.
State and local employer contributions to NYSLRS will more than double over the next five years, adding nearly $4 billion to annual taxpayer costs even if most opt to convert a portion of their higher pension bills into IOUs that won’t be paid off until the 2020s.
New York City’s budgeted pension contributions, which already have increased by more than 500 percent ($5.8 billion) in the last decade, are projected to increase at least 20 percent more, or $1.4 billion, in the next three years.
The report also evaluates the solvency of the pension funds, estimating that NYLSRS and NYSTRS have combined funding shortfalls of $120 billion when their liabilities are measured using private-sector accounting rules. Based on a similar alternative standard, New York City’s pension funds had reported unfunded liabilities of $76 billion as of mid-2008—before their net asset values plunged in the wake of the financial crisis.
New York’s pension funding trends highlight the need for fundamental pension reform as soon as possible, according to the report.
“This is not just a matter of financial necessity but of basic fairness to current and future taxpayers—the vast majority of whom will never receive anything approaching the costly, guaranteed benefits available to public employees,” the report says.
The report was released today at an Albany forum, sponsored by the Empire Center, attended by more than 100 state officials, legislators, staff and other interested parties. It was written by E.J. McMahon, a senior fellow of the Empire Center, and Josh Barro, the Walter B. Wriston Fellow at the Manhattan Institute for Policy Research. The Empire Center is a project of the Manhattan Institute, one of the nation’s leading non-profit think tanks.