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Pension Contributions for Public Employees Set to Rise Again

Comptroller Tom DiNapoli announced substantial increases in the amounts local governments and school districts must shell out next year to cover employee pensions. With little left to cut, property tax increases may be the only solution in some places.

Cash-strapped local governments looking for relief from burdensome state mandates will have to wait at least another couple of years.

State Comptroller Tom DiNapoli this week announced that pension contributions for government employees will once again rise significantly in the 2012-13 fiscal year, due largely to losses incurred during the near-crash of the stock market in 2008.

"I remain confident that our long-term investment strategy will help us to weather this volatile economic environment," DiNapoli said in a statement, noting the pension increases are not as great as they were over the last two years.

State law requires shortfalls in the state's $146.5 billion pension fund to be made up by taxpayers, since pension payouts are guaranteed by the state constitution. Higher contributions for county and local governments mean potential service cuts and property tax increases for state residents, many of whom are unemployed or have otherwise been hammered by the recession.

According to DiNapoli, the average contribution rate will rise about 16 percent, with an average hike of 19 percent for police and firefighters. Rates rose by as much as 37 percent this year. The increases take effect in February.

Many local governments have already trimmed their budgets to the bone to cope with the lingering effects of the recession. Westchester County eliminated 10 percent of its workforce, while many school districts laid off teachers and curbed spending on equipment and towns and villages scrapped recreation programs and road paving, among other services. When there's nothing left to cut, property tax increases become the only feasible way to drum up the money.

Freshman Gov. Andrew Cuomo attempted to stop the bleeding this year by championing a two-percent cap on annual property tax increases, but the final version negotiated by state lawmakers included an exemption for pension increases that rise above two percent. About 0.6 percent of the salaries paid to municipal workers and school staff will be exempt next year, while more than two percent of police and fire salaries will slide through the loophole. In cities and larger towns and villages, that could amount to tens of thousands of dollars.

A report released last week by the Manhattan Institute for Policy Research, a think tank, found that New York's cities can expect to be disproportionately hit by the pension hikes because they employ more police officers and firefighters. E.J. McMahon, a senior fellow at the institute, said last week that more than three-quarters of next year's increases will be covered by the tax cap.

"This will add to existing strain on local budgets, which in turn should add to the pressure on state officials to enact meaningful mandate relief," McMahon said.

Cuomo is also seeking pension reform for new hires, with a package of proposals that he says will be a top priority next year. He wants to raise the retirement age from 62 to 65 and require employees to pay more for their health insurance.

Speaking to reporters at a ribbon-cutting ceremony on the first day of the State Fair last week, Cuomo said, essentially, enough is enough.

"When I was at this fair last year, I can't tell you how many people came up to me and said, I can't do it anymore. I just can't take it," he said.

Pushing those reforms through the legislature will likely be an uphill battle, as the state's largest public unions have already accepted historically austere five-year contracts that include three-year wage freezes, furloughs and increased health care contributions.

Public union leaders in New York and across the country have tried to frame the fiscal woes purely as short-term problems resulting from the recession, but many politicians, including the governors of New Jersey and Wisconsin, have laid blame at the feet of the unions and moved to curb collective-bargaining rights.

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