GOVERNOR PATERSON ANNOUNCES PENSION REFORM PROPOSAL WILL DELIVER SAVINGS OF NEARLY $50 BILLION OVER THE NEXT 30 YEARS, PROVIDE SUBSTANTIAL RELIEF TO LOCAL PROPERTY TAXPAYERS

Governor David A. Paterson today announced the findings of a Division of the Budget analysis, which projects that the pension reform proposal included in his 2009-10 Executive Budget will save taxpayers a cumulative total of $48.5 billion over the next 30 years.

“I recognize the important contribution public employees make to life in New York. But in this time of fiscal crisis, we need to implement reforms across all areas of State spending,” said Governor Paterson. “The changes I have proposed will continue to deliver a secure retirement for pensioners, but at a more affordable cost to taxpayers. We must use our current fiscal crisis as an opportunity to make smart choices today that will pay big dividends in the future, particularly for overburdened local property taxpayers.”

Mayor Michael Bloomberg said: “New York City has already cut $2.5 billion in spending since 2008, and we’ve been able to cut from every area except one: employee benefits, which are growing far beyond the rate of inflation. At a time when people are living longer and longer, we can no longer afford our pension system. Our modest reforms will save taxpayers money and allow us to limit layoffs, service reductions and tax hikes. Without reducing our pension and health-care bills, we could be forced to make cuts that could jeopardize the incredible progress we have made reducing crime, improving the schools, and improving the quality of life in all five boroughs.”

Municipalities outside of New York City will realize savings of $32.2 billion over the next 30 years from Governor Paterson’s proposal. These include $7.5 billion in savings for the State government, as well as billions of dollars in savings for local governments that will help reduce property taxes. School districts outside New York City will realize $16.6 billion in savings over the next 30 years. Other municipalities and public entities outside of New York City, including, cities, counties, towns, villages, water authorities and libraries will achieve $8.1 billion in savings.

The City of New York would achieve additional savings through a companion proposal introduced by Governor Paterson at the request of Mayor Bloomberg. The City has estimated savings of $200 million next year and $16.3 billion over the next 30 years from these initiatives.

Governor Paterson’s Executive Budget would create a new tier of pension benefits (Tier V) for most newly hired public employees. Many of the proposed changes for Tier V would remove pension enhancements added in recent years to Tier IV. These new rules include restoring the minimum retirement age from 55 to 62; requiring employees to continue contributing a percentage of their salaries towards pension costs for their entire careers rather than ending contributions after ten years; increasing the 2 percent multiplier threshold from 20 to 25 years; restoring the minimum years of service required to draw a pension from five to ten years; and others.

Local governments and the State would immediately realize savings from these proposals because their required contributions to their respective pension funds for new employee hires subject to Tier V would be lower than that for current employees. Over time, as greater numbers of new Tier V employees are hired and current employees leave the workforce, taxpayer savings will grow exponentially. Within 30 years, annual savings outside of New York City are expected to total $1.9 billion: $453 million for the State government, $1 billion for school districts, and $477 million for other municipalities and public entities outside of New York City.

A copy of the Division of the Budget’s analysis is available at http://www.budget.state.ny.us/pubs/press/2009/finalPensionReport.pdf.