Labor unions’ plan to improve retirement benefits for recently hired public workers would cost taxpayers roughly $1.5 billion a year, according to people briefed on the proposal.
The unions’ plan to change the Tier VI pension law is a starting point to make changes as part of the $263 billion state budget, officials said. The proposal was presented to Gov. Kathy Hochul and top state legislators as they blew past the April 1 budget deadline, according to three people who were briefed on the proposal but not authorized to speak publicly.
The initial proposal would cost New York state $242 million on top of the $3.4 billion it projects it will spend next year on pensions, according to people briefed on it. New York City’s pension costs would rise a projected $328 million. School districts in the rest of the state would collectively pay an additional $480 million, and local governments would pay $407 million, the people said.
Newsday first reported on the new proposal and its potential costs.
Supporters of changing Tier VI say the 2012 pension law has made it harder to retain public-sector workers, including teachers, clerks and uniformed employees. Under Tier VI, people hired after April 1, 2012, must work until age 63 to retire with full benefits and must contribute between 3% to 6% of their salaries toward their pension costs.
“I think this is a worthwhile investment in the future so that we are protecting the workforce and people can live with the dignity they deserve” when they retire, said state Sen. Jessica Ramos, a Queens Democrat.
But opponents question whether pensions have anything to do with workforce shortages. They also blanch at the recurring cost. Public-sector retirement benefits are funded by investment returns and government employers, who ultimately raise revenue from taxpayers.
“This is going to drive up property taxes in the suburbs and it’s going to be a major hit to Mayor Mamdani’s budget,” said Ken Girardin, a fellow at the fiscally conservative Manhattan Institute. “This isn’t an investment — it’s a giveaway.”
The unions’ proposal would let people in the Tier VI pension program retire at age 55 if they have been working in the public sector for 30 years, the people said. This was a particular concern for teachers and matches the rules applied to public employees hired before 2012.
The proposal would reduce the amount of money employees must contribute to their pensions to a maximum of 5%, depending on income. Uniformed workers outside of New York City would be able to count more overtime their pension benefits.
Gothamist reported this week that New York State AFL-CIO President Mario Cilento has been working to forge consensus among different public-sector unions and discussing his plan with State Budget Director Blake Washington, who is Hochul’s top fiscal aide.
A spokesperson for Cilento declined to comment. Washington told reporters on Wednesday that he was looking at the proposal and “assessing what we can afford.”
“A reflection of this Tier VI debate is, how do we preserve really competent people in those workforces?” He said. “But alternatively, we have to make sure that we're able to pay for it. And it's not just we, the state of New York, but local governments as well.”
Associations representing local government officials issued a statement this week saying the state needs to cover any increased costs associated with the law. Washington said that wasn’t possible.
New York City Mayor Zohran Mamdani said last week that he supports changing Tier VI and said new tax revenue would ease its budget impact.
“There need to be changes to Tier VI because we need to make it as easy as possible for New Yorkers to enter a life of public service,” he said.
New York State Association of Counties Executive Director Stephen Acquario said he was looking for more details about the potential impact of the proposal on county budgets. Part of that has to do with the investment returns of the state pension fund.
“Certainty is how we govern and budget, and now we have two new twists: fund returns and these enhancements that are being discussed,” Acquario said. “We’ll have to do an analysis and see what the effect is on the percentage of our payroll.”
Includes reporting from Jon Campbell.
