Paterson Signs Pension Reform Bill

By Karen DeWitt

Albany, New York – Governor Paterson signed public pension reform legislation into law that he says will save billions of dollars in the future, and help hold down property taxes.

Paterson signed the legislation in North Hempstead, Long Island, where property taxes are among the highest in the nation. The governor says for years, pension funds paid out to state and local government employees have been more generous than New York and municipalities can actually afford.

"The younger taxpayers are unable to support the pension system," said Paterson, who said local governments and schools are "at the brink", because of the imbalance.

Paterson estimates that $35 to $40 billion dollars can be saved in the next quarter century, if the new plan, known as Tier V, holds. Under it's provisions, government workers will have to contribute more money to their own pensions and will have to wait longer to be vested into the system. They will no longer be able to accrue large amounts of overtime during their final years of service, in order to boost their pension payments when they retire. The minimum retirement age to receive a full pension would be increased to 62, although teachers would be permitted to retire at age 57.

Paterson says the future benefit reductions should not be construed as any kind of "judgment" on current public workers. State worker unions agreed to the new pension tier several months ago. In exchange the governor has not recommended any lay offs or furloughs for public employees.

While the governor is giving school districts and local governments some cost savings in the future, Paterson says he intends to carry out his plan to cut funds to local governments and schools in the short run. He continues to say that the state will run out of money if it pays everything that's owed in December, including $2.5 billion dollars in reimbursements for the STAR property tax relief program, $1.6b in aid payments to schools, and $461m to local governments.

"If you owe 100 eggs, and you have only 90 eggs, which is kind of where we are, you have a problem, " said Paterson.

The governor says he also intends to tap the state's rainy day fund until new tax revenues come in next month.

Paterson is short of funds because the legislature did not enact all of his requested $3.2 billion dollars in budget cuts during a month of special sessions in Albany. Tensions between the governor and some members of the State Senate have lingered, and Paterson did not hesitate to single out two major players in the current Senate leadership for criticism, Senate Finance Committee Chair Carl Kruger, and Senate Majority Leader Pedro Espada. Both Senators have publicly criticized the governor, and many Senate Democrats, including Senate Leader John Sampson advocating refinancing the bonds from the state's tobacco industry settlement, an idea the governor rejected.

"Yes, I do have a problem with a number of those Senators," said Paterson. " I'm not going to stand here and be disrespected."

The governor says refinancing the bonds would have actually meant that New York would have paid a higher interest rate than it is presently paying.

"What kind of math is that?" he asked.

Senate Conference Leader Sampson did not attend the bill signing ceremony, although Senator Craig Johnson, who represents parts of Long Island, did attend.

Assembly Speaker Sheldon Silver, who has not publicly feuded with the governor, was at the event, and praised the pension reform legislation as a bi-partisan effort.

Meanwhile, the State Comptroller has begun issuing daily reports outlining the state's cash flow situation. Comptroller Tom DiNapoli says while there's enough money right now to pay what's owed, there likely will not be enough later on in the month to cover all of the bills.