screen-shot-2014-10-30-at-10-30-56-am-150x150-6905501After holding it for four months, the state Senate has just sent Governor Andrew Cuomo a bill that would add hundreds of millions of dollars* to state and local pension costs by allowing public employees to claim pension service credit for time spent in peacetime military duty.

The bill was one of several pension sweeteners passed in a rush during the final days of the legislative session in June. Coming less than a week before the Nov. 4 election, and less than two weeks before Veteran’s Day, the timing of the bill’s transmission to the governor’s desk was … interesting. According to the Legislative Retrieval Service, the other sweetener bills are still being held.

As recounted on this site back in June:

Under current law, [state and local government] employees are eligible to purchase credited pension service time for up to three years of military service, providing they were in the military during the World War II, Korean War and Vietnam eras, or served in specified theaters of combat operations in Grenada, Panama or the Middle East since the 1980s. [**but not Afghanistan, Somalia or the Balkans–see note below]. But the Assembly and Senate yesterday both passed a bill that would remove those restrictions, effectively allowing employees to seek additional pension service credits for any three years in the military, no matter where or when it was served.

The bill first appeared in April as under the sponsorship of Assemblywoman Amy Paulin, D-Scarsdale, and ultimately was superseded by a Senate version filed just last week by Sen. William Larkin, R-Cornwall-on-Hudson. It passed the Senate by a 57-4 margin on Monday and passed in the Assembly yesterday by a vote of 133-1.

If Cuomo signs the bill,  all military veterans hired before 2012 could purchase their added pension benefits at a maximum of cost of 3 percent of their covered salary, while Tier 6 employees would have to pay 6 percent a year. The total cost to the system is much higher: estimated at 12 percent of compensation per year of additional credit for ERS members and 17 percent for members of the Police and Fire Retirement System (PFRS) hired before April 2012. For Tier 6 members, the total cost would come to 9 percent and 14 percent, respectively.

In the absence of more detailed information on the number employees eligible for the benefit, the state actuary did not estimate the total cost in actuarial present-value or recurring annual terms, but some idea of the potential impact could be gleaned from the separate estimate submitted by the New York City actuary, Robert North. The present value cost of added benefits to the five city pension systems would come to $178.5 million, of which $152 million would be borne by the employer (i.e., taxpayers), North said in a note appended to the bill. The added annual employer cost for the city was estimated to start at $18 million.

Of course, the governor risks being called “anti-veteran” if he vetoes the bill–and the timing of its arrival on his desk suggests he plans to sign it in any event. But ask yourself: is it really fair to offer, say, a military veteran who spent a few years manning a desktop computer at a stateside base the same valuable added benefit as an ex-soldier who actually saw combat? New York’s answer was “yes” from World War II through the Vietnam era, and this effectively would make that approach permanent. The sponsor’s memo says the new bill is designed to encourage citizens to volunteer for the military.

Previous pension buyback benefits were limited to periods when young men were subject to the draft (i.e., veterans typically had lost government employment time involuntarily), except for the last two years of the Vietnam war.

* Based on a note received from a reader, a further clarification: as noted in the previous blog post quoted above, the “hundreds of millions” reference is to a total, net present value. The annual costs will be lower: $18 million in the case of the city, which would suggest a figure in the neighborhood of $8 to $10 million a year for the rest of the state. Unfortunately, although the city obviously was able to calculate a figure, the state comptroller’s office did not provide a comprehensive actuarial estimate or analysis of the bill; the fiscal note merely describes the potential added contribution rate per employee.

** The current law does not offer the added retirement buyback opportunity to veterans of combat operations in Afghanistan, Somalia, or the Balkans. Details can be found on this retirement system page.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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