Suffolk County’s proposed operating budget is showing a tax increase in both the general and police district funds. The town of Hempstead is seeking a 12 percent increase. Numerous other towns are proposing tax increases, as are most school districts on Long Island.
We question whether these increases are needed while the schools, towns and county are sitting on record reserves left over from the pandemic, but we cannot lose sight of the fact that these municipalities are being required to pony up more money for the state pension fund as a result of irresponsible actions by the State Legislature earlier this year.
These increases are, at least in part, the direct result of the pension time bomb starting to explode.
Back in 2012, there was recognition that public-sector pension obligations were a train going off a cliff. So the Legislature implemented a new plan for newly hired government employees that limited the amount of overtime that could be rolled into their pensions. It also required higher contributions from those new employees, and raised their retirement age. The reforms were estimated to be saving taxpayers up to $1 billion annually.
Legislators took bows for how responsible they were. But then, when they thought no one was looking at the end of last session, the Legislature folded under pressure from members’ municipal union benefactors, and the reforms were watered down or, in some cases, outright reversed.
But the give-it-away Legislature wasn’t done yet. It also added a sweetener that allows final pension calculations to be based on the last three years of service, rather than the present five, which generally have a lower average pay.
These maneuvers will result in an additional $1.5 billion for the New York State and Local Employees Retirement System. They are likely to add over $4 billion in additional debt for all of the public pension systems throughout the state.
Every time pension costs go up, the state comptroller mandates that schools and local governments pay a bigger percentage into the pot. Thus, when a newspaper reports that an employee is making $100,000, the actual cost to the taxpayer is far beyond that. First, add another $30,000 for the cost of health care. Then add another percentage on top of that for the employee’s eventual pension cost. For average employees, it could be as much as an additional 16.5 percent.
For police officers, it could be as high as 33.7 percent. That’s up to $33,700 for the pension cost annually on top of a $100,000 salary and the $30,000 in health benefits. On a police officer’s $200,000 salary, that amount jumps to $67,400.
Our Center for Cost Effective Government warned in a white paper a few years ago that we are headed for tough times if we don’t get control of these pensions. We suggested totally ending the practice of adding overtime into pension calculations. Doing so could save taxpayers $50 billion to $80 billion over the next 20 years.
Not only was our warning ignored, but the Legislature made things even worse. And now you are paying for it via another tax increase.
It’s axiomatic that elected officials will continue to be free to make decisions that are contrary to the interests of the taxpayers they serve. The question is, how long will we continue to accept a system in which legislators who sweeten the pot at the behest of their union leader benefactors are able to accept campaign contributions from those same benefactors?
Steve Levy is executive director of the Center for Cost Effective Government, a fiscally conservative think tank. He served as Suffolk County executive, as a state assemblyman, and as host of “The Steve Levy Radio Show.”