Change pension calculations
Taxpayers need reasonable end to practice of ‘overtime spiking’
New York State should move now, in this time of financial turbulence, to avoid a destructive financial tidal wave in the future. The state’s pension system needs reform to end the abuse of “pension spiking” that sees overtime paid now cost taxpayers extra years of augmented benefits when the state pension fund’s investments don’t cover retiree costs.
Buffalo control board chairman Paul J. Kolkmeyer is on the right track in calling for elimination of overtime in the calculation of pensions. Buffalo officials, not to mention taxpayers, could use some relief in the costs entailed by the current piling up of overtime by public employees, particularly police and fire, in their last few years of work. Firefighter pensions alone are up 50 percent, after overtime increased fivefold in the past five years; 55 city workers, most of them police or fire, made more than $50,000 in overtime last year.
News reporter Susan Schulman recently outlined a long-standing practice in which the Fire Department has meted out overtime to chosen individuals, most on the brink of retirement. City officials may have their hands tied, by state law and by contracts that were negotiated prior to this administration that provided for minimum staffing levels and the process by which overtime is managed through the union. Unless there’s a new contract with firefighters, city officials claim there’s not much they can do. And they may be right, although there’s a management issue involved as well.
But the current system not only pays firefighters for the extra time they’re called upon to work—an issue tied to staffing levels, which now are comparable to other cities— but keeps paying them that overtime throughout their years of retirement thanks to pension calculations that consider their last years of earning, overtime included.
Capping or ending that overtime inclusion would provide fair pensions linked to the recipient’s normal compensation level, and more safely and fairly distribute overtime by eroding an incentive for older workers to claim the more arduous extended or extra shifts without denying them that seniority right.
Progress had been made with the fire commissioner in terms of authorizing overtime in all areas, except mandated arson inspections and training. Two contracts have been negotiated, but both failed ratification by the rank-and-file. In an unfortunate circle, the city cannot afford the contracts without reducing overtime but can reduce overtime only by making changes to the way it’s granted in the contract.
Much of the solution lies within state law and, interestingly, the governor also has a recommendation in this year’s budget that would essentially exclude overtime pay from the basis of calculating the final salary for pension purposes— except for police and firefighters. It’s only for future calculations because, constitutionally, an existing benefits structure cannot be changed; instead, it has to be instituted as part of creating a new pension tier for police and fire.
The question is whether the governor and state legislative leaders have the backbone to change the system in ways sure to draw the wrath of unions—however much it would benefit taxpayers, their children and their grandchildren.
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