By msnbc.com staff
The pension cuts that public workers in New York will face are just the latest in a litany of retirement benefit reductions instituted by financially strapped states across the country, even as the economy flickers back to life.
A report released this week by the National Conference of State Legislatures says 43 states reduced retirement benefits for broad categories of public employees and teachers from 2009 through 2011. The changes to public pension plans, once considered a sacred cow immune from the chopping block, include increasing employee contributions, boosting age or service requirements for retirement, or both.
“What it says is that policy makers have found existing public employee plans to be too expensive for them to afford in the future, so they’re essentially shifting more of the cost to employees in a number of ways,” Ron Snell, a director with the National Conference of State Legislatures in Denver, told msnbc.com.
The New York Legislature early Thursday approved a pension overhaul proposal backed by Gov. Andrew Cuomo that reduces retiree benefits for future state and local government workers, increases employee contribution rates and boosts the retirement age for most new workers by one year to 63.
Cuomo said the reforms will save more than $80 billion over the next 30 years.
"For years, local governments have struggled to cope with soaring retirement costs, driving up taxes on New York families and small businesses," Cuomo said in a statement Thursday. "Without this critical reform, New Yorkers would have seen significant tax increases, as well as layoffs to teachers, firefighters and police."
New York lawmakers pass sweeping pension cuts
The AFL-CIO, the largest U.S. labor group, blasted the plan as harmful to employees.
“Instead of cutting pensions for workers, we should focus on ensuring that corporations and the wealthiest New Yorkers are paying their fair share of taxes,” the labor group said in a statement this week.
New York’s $140.3 billion fund is the third-largest U.S. public pension plan, and one of the best-performing. It had 101.5 percent of the money to pay its obligations in 2010, according to an annual study by Bloomberg Rankings.
So if New York can’t afford to maintain its current level of retiree benefits, can any state?
The California Public Employees' Retirement System, the nation's largest public pension fund, this week lowered its forecast for investment returns and asked the state of California, school districts and local governments to increase contributions — a move that could siphon more money from basic services.
CalPERS’ $233 billion fund, which serves 1.6 million California government workers, retirees and their families, has an unfunded liability of at least $85 billion, according to The Associated Press.
Across the nation, Snell says, states are trying to play catch-up with a reservoir of unfunded liabilities caused by two severe recessions since 2000. The economic downturns wreaked havoc on the value of stocks and other assets held by pension funds. Couple that with an increasingly aging workforce that's nearing retirement and you have a recipe for pension pitfalls.
“The big issue is not so much pensions going forward as it is large unfunded liabilities that are legacies of the past,” Snell says. “Reducing pensions costs going forward puts states in more favorable position to address those problems, but doesn’t resolve them.”
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