Pension reform is now New York City’s “No. 1 priority in Albany,” Mayor Bloomberg announced in his State of the City message this week. Bloomberg’s push to get control of city pension costs comes not a moment too soon—and New Yorkers can only hope it isn’t already too late.

Under a bloated benefit structure in place before Bloomberg took office, the city’s pension costs have skyrocketed from just over $1.5 billion in fiscal 2001 to a projected $8.3 billion in fiscal 2012.

Twenty cents of every dollar in city taxes will soon go to municipal pensions funds. And it won’t stop there.

As of fiscal 2008, before their biggest market losses in the wake of the financial crisis, the city’s five pension systems had officially reported unfunded liabilities of more than $42 billion. And that was actually a lowball figure, based on lenient government accounting rules that allowed the funds to unrealistically assume an 8 percent long-term annual rate of return.

Measured by market-based accounting standards, similar to those used by private pension plans, the city’s combined unfunded pension liability was over $76 billion in mid-2008—and is surely larger now.

The mayor’s argument for pension reform is a strong one and his first target is a good one: the $12,000 annual “Christmas bonus” that now flows to retired police and firefighters on top of their pensions. Since the bonus is not subject to the con stitutional provision barring changes to regular pension benefits, it could be eliminated to morrow at a sav ings of $200 mil lion a year.

The mayor’s proposal to merge the city’s five plans into a single administrative unit is also a long-overdue step. It would not only save $8 million a year; it would bring some much-needed transparency to the funds’ confusing and inconsistent financial-reporting formats.

Unfortunately, the core of the mayor’s pension reform is weak—and it all culminates in a giant step backward.

Bloomberg would seek a new “tier” for newly hired non-uniformed employees, raising the minimum retirement age to 65 (it’s now 55). This would be cheaper than the current plan. But by preserving the traditional defined-benefit structure, it would continue to expose the city to the open-ended financial risks, unpredictable costs, misleading accounting and opaque financing of today’s system.

The mayor’s surprising failure to advocate a shift to a 401(k-style, defined-contribution retirement plan, even at the option of employees—the sort already chosen by the vast majority of state-funded City University professors—is a huge missed opportunity.

History indicates that any mere reduction in traditional pension benefits won’t last as long as the careers of the employees hired under the plan. Over the last 30 years, public-employee unions and their allies in the Legislature have regularly and successfully pursued “tier equity”—getting benefits ratcheted up to their old levels.

That’s where the mayor’s big step backward comes in. To prevent the Legislature from dictating unaffordable pension hikes, Bloomberg has resurrected a 4-year-old proposal to make pensions a subject of collective bargaining.

Pension benefits are now shaped by state law and are expressly excluded from union contract negotiations. Understandably frustrated that state lawmakers show interest only in sweetening benefits, Bloomberg says the city needs to control its own pension costs.

There are two big problems with this approach. First, and most obvious, for all of his good intentions, Bloomberg won’t always be mayor. Second, he already has the ability to collectively bargain health-insurance benefits—yet has achieved virtually no savings there.

Indeed, the only pension change the mayor has, in effect, negotiated during his tenure (via a side deal with the teachers union) was exceedingly modest. For example, the taxpayer-guaranteed rate of return on teachers’ tax-deferred annuity accounts was reduced from 8.25 to 7 percent. Try getting that on your personal retirement account.

Bloomberg expressed hope that Gov. Cuomo would support his agenda because Cuomo “campaigned on pension reform.” If only that were actually true. On pensions, as on so many other issues, Cuomo has ranged from coy to vague, embracing the concept of reform with no details.

It’s by no means clear that Cuomo will support Bloomberg—and on collective bargaining, he absolutely shouldn’t. But in this area, as on so many others, New York’s governor may be the best hope for serious reform.

Public pensions represent a looming crisis throughout the nation. For that reason, it’s important that the nation’s No. 1 mayor is tackling the problem head on—and, in the final analysis, disappointing that his approach misses the mark.