State and local government workers enjoy pensions that far outstrip the norm for private-sector workers, most of whom have no guaranteed pension at all. Rising pension costs have been straining budgets for every level of government in New York, and future obligations will continue to climb as the number of retirees grows.

Despite this trend, the state Legislature continues to approve generous sweeteners in pensions for entire groups of state and local employees, as reviewed in this July 2005 FiscalWatch memo. But in the wake of the strike, such moves ar elikely to come in for more public scrutiny.

Who sets pension policy in New York?

The Transit Workers Union (TWU) itself injected the issue of pensions into this year’s contract talks by including among its initial demands a further expansion of transit workers’ already generous pension rights. The TWU wanted the existing “25/55” provison — allowing employees to retiure at age 55 after 25 years of service — to be changed to retirement as young as age 50 with just 20 years of service.

When the MTA countered by asking for the retirement age to be raised to 62, and for employees to make larger contributions to their own pension funds, the union complained that the management proposal violated a Taylor Law provisions that makes it clear pensions cannot be a mandatory or binding subject of collective bargaining.

The bottom line: with a final settlement still awaiting union ratification as of Dec. 27, the MTA ultimately had to withdraw its proposal. However, because pensions for all government employees in New York are set by law rather than contract, the pension issue remains very much alive.

The transit strike has dramatically raised the visbility of an issue that concerns taxpayers all over the state, not just New York City transit system users. To quote from one of McMahon’s Post articles:

The key actor now is Gov. Pataki. Having spent the second half of his gubernatorial tenure making a variety of costly concessions to unions, Pataki turned a corner when he allowed the MTA (which he controls) to make an issue out of public pension costs. Better late than never.

In the year he has left in the governor’s office, Pataki has a chance to build on the heightened public awareness and anger generated by the TWU’s self-destructive militancy. Mayor Bloomberg has already made it clear he wants the state to enact pension reform for city employees. The governor should lose no time in proposing a comprehensive restructuring of pension benefits for every level of government in New York — which, at the very least, will finally put the issue on the table in Albany.

In December 21003, the Manhattan Institute issued a detailed study of this issue, “Defusing the Pension Bomb: How to Curb Public Retirement Costs in New York,” which recommended shifting government employees from a guaranted “defined-benefit” pension to a savings-based “defined-contribution” plan. The full report can be found here.