Local governments and the state increased borrowing off the state pension fund to pay yearly retirement costs by 22 percent between 2013 and this year, state records show.
As pension costs soar, 133 municipalities deferred $472 million in retirement obligations this year — a record amount, data from the state Comptroller’s Office showed. Last year, 139 employers borrowed $368 million.
Local governments said they had no choice but to enter the state’s amortization program, which allows them to essentially borrow off the state’s $161 million pension fund to pay the ongoing expense with interest over as many as 12 years.
Some of the state’s largest municipalities have been the largest beneficiaries of the program, which covers the pension costs for public workers and police and fire employees.
Westchester County is borrowing $43.5 million to pay off its more than $100 million pension tab. That’s up from $25 million borrowed in 2013.
Ned McCormack, a county spokesman, said the county could have either joined the amortization program or laid off workers — which would have led to cuts in services.
He said delaying pension bills was the better solution.
County Executive Rob Astorino is the presumptive Republican candidate for governor this year.
“We went into this program extremely reluctantly,” McCormack said. “But we were left with just two bad options.”
Local governments readily admit that delaying pension costs, plus interest, isn’t great fiscal policy.
They said, though, they have no alternative as they grapple with limited revenue, growing bills and a property-tax cap that restricts how much they can raise in new money.
Elmira Mayor Sue Skidmore said she’s lobbying the state Legislature to pass a law so the city can borrow through the bond market to pay its pension tab. It’s borrowing about $1.3 million through the pension fund this year as part of its total $4.6 million tab.
“We have zero in economic growth here. Sales-tax revenues are down; we’re under the constraint of a tax cap,” Skidmore explained.
Gov. Andrew Cuomo last year offered an alternative “pension smoothing” option for local governments that allows them to spread out payments over 12 years instead of 10 in the initial plan in 2011.
It’s been a more viable option for some of the largest local governments in the state. Nassau and Suffolk counties went with the new option, as did Monroe County and Yonkers.
Monroe County entered the new program this year, borrowing $21.8 million of its $56.7 million pension bill for 2014. County spokesman Justin Feasel said the new program had a lower contribution rate, and the annual rate increases were lower.
“From our perspective, the new stabilization program has two significant up sides,” he said.
Yonkers offered a similar rationale. It’s borrowing $21.2 million to help pay off its $60 million pension tab in 2014.
“We have limited resources to pay the bill in full,” said city spokeswoman Christina Gilmartin.
Other local governments entering one of the two programs this year include Putnam and Rockland counties and the cities of Mount Vernon, Rochester, Peekskill and the village of Endicott, Broome County.
School districts can also opt into the pension-smoothing plan that was adopted last year.
But schools have until next month to decide, and few have entered into it so far, according to the Teachers’ Retirement System.
Critics said the delay in pension payments is poor policy.
“You’re just pushing your problems down the road,” said E.J. McMahon, president of the Empire Center for State Policy, a fiscally conservative group in Albany. “And you are increasing the risk that you’ll get really clobbered the next time — and there will be a next time — that there is a significant market correction in the pension fund’s asset values.”
Fiscal stress from pension costs may be lessening, though. State Comptroller Thomas DiNapoli projects a decrease in pension costs in 2015, and some local governments predicted they won’t need to borrow more next year — even though they’ll still be paying back the previous borrowing.
The pension spike occurred as the state’s pension funds struggled during the recession in 2008 and 2009.
The state is the largest pension borrower, deferring $937 million in the current fiscal year that started April 1. But the state estimates it won’t have to incur new borrowing expenses next year.
“Pension rates, which spiked due to the recession, remain extremely high,” said Morris Peters, a spokesman for Cuomo’s budget office. “Amortization takes volatility out of the state’s pension contribution costs and helps us maintain stability.”
© 2014 Gannett News Service
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