pensions

Gov. Andrew Cuomo has proposed a program that would help local governments save on near-term pension costs, potentially relieving local administrations of a major budgeting challenge, but both County Manager Jay Gsell and City Manager Jason Molino are reacting to the news with some caution.

Molino said until he can fully study the budget bill, assuming this provision even moves forward, he can't really comment on it.

He isn't yet ready to agree with the governor that the city will realize $3.1 million in pension savings over the next five years.

In a press release yesterday, Cuomo isn't promising local governments that they will completely avoid the pension expense, just some relief from near-term pension cost instability.

From the press release:

Under the plan, localities are given the option for a stable pension contribution rate that significantly reduces near-term payments but still keeps the pension systems fully funded over the long term. Local governments which opt in would avoid significant volatility in contribution rates and be better able to plan for the future. Though the locality receives short-term relief, because the contribution rate remains fixed, the total amount paid into the fund by the locality would not be diminished over the life of agreement, thereby maintaining the fiscal stability of the pension fund.

While over the next five years, Genesee County could receive a $11.5 million benefit over five years under the plan, Gsell is also keeping the proposal at arm's length.

Here's his e-mail response:

On the surface it is intriguing, but there are concerns as to the back-end balloon escalators in 10 to 25 years and what Comptroller Dinapoli will do every 5 years to "protect" the retirement system dollars is a major note of caution. This could be the NYS version of the Titanic iceberg, only it involves our budgets and employees retirement assets. Once the full details and not just the second-floor spin are revealed we will look at our pay-as-you-go options.

A year ago, Albany enacted a Tier VI retirement plan, which covers only new hires by government agencies. The plan will supposedly greatly reduce local government pension costs, but not for decades from now. What Cuomo is proposing now is to shift those savings so local governments can realize some benefit from Tier VI in the near term.

In the press release, Cuomo hails the plan as a major step toward helping local governments.

"The difficult financial pressures facing localities are well-known here in Albany, and my administration from day one has been committed to helping local governments meet their budgetary obligations as well as continue to provide critical services to their residents," Governor Cuomo said. "While the Tier VI reforms were a major step toward helping local governments deal with the pension crisis, we understand that more help is needed. For this reason, the Executive Budget proposed the Stable Rate option to offer local governments and schools a bridge to the long-term savings of Tier VI, as well as greater predictability."