Governor Cuomo today unveiled proposed “pension reform” legislation that follows exactly the outlines he began leaking to the media a month ago — which is a disappointment, if not exactly a surprise.  Certainly if Cuomo’s pension program ends here, it will undermine the governor’s attempts to portray himself as a “transformational” reformer.

For newly hired employees, at both the state and city level, Cuomo would keep intact the existing defined-benefit pension system while reducing benefits, raising retirement ages and increasing employee contributions.  While it will be labelled “Tier 6,” Cuomo’s plan might more accurately be described as Tier 5-A — a few steps beyond David Paterson’s 2009 pension reform without breaking the defined-benefit (DB) mold.  Cuomo isn’t going anywhere near a defined-contribution (DC) retirement alternative, not even as an option, although he floated a few trial balloons in that direction as recently as a month ago.

Public employee unions will howl bloody murder over this proposal, but don’t be fooled. If history is any guide, assuming yet another new “tier” is ultimately adopted, they will lobby to restore benefits to current levels long before anyone in the new plan reaches retirement age.

Even the parts of the proposal that sound far-reaching do not go as far as they could.  For example, the governor’s bill would eliminate overtime and accumulated vacation pay from “final average salary,” or FAS, used to calculate pension benefits, eliminating an important source of pension enrichment for cops and firefighters.  That’s good as far as it goes.  But there is no mention of excluding from FAS the differential or holiday pay commonly collected by the same workers.

Another positive aspect of the bill is that it would apply to New York City municipal workers as well as all other state and local workers.

However, while Cuomo’s bill promises to reduce the “expected long-term rate” of employer contributions by more than half, it will remain impossible for employers to project their pension costs more than a year  or so in advance.  That’s the nature of the DB system he would preserve.

Under Cuomo’s proposal, New York’s public pension funds would continue to systematically understate the true cost and value of benefits, misrepresent the size of long-term liabilities associated with keeping pension promises, and expose future taxpayers to massive, open-ended financial risks that can result in skyrocketing costs.

In other words, he isn’t fixing the fundamental problem here.