The question revolving around Gov. Andrew M. Cuomo’s plan announced Tuesday to allow local governments and school districts to “lock in” stable pension contributions during future years was this: fiscal relief or financial gimmick?
Those struggling to cope with surging pension costs for towns and school districts eyed early details of the proposal with hope that it would help stabilize a fluctuating expense over which they have little control.
“I think it’s a creative way to help cities,” said Mayor Byron W. Brown of Buffalo, where the governor said the city could see $19 million in savings under the first year of the pension stabilization plan.
Cuomo, in his budget proposal, unveiled a plan to allow local governments and school districts to tap into savings now that they expect to see in future years as public workers are hired under a new public pension tier with less-generous pension benefits. Municipalities that choose that route, he said, would see relief now – while pension contributions have spiked – but would pay the same rates in future years when contributions are expected to go down.
The state expects pension costs to drop as a new class of workers hired under the newly created pension tier – Tier VI – come on board.
“It basically provides a financing plan to get the municipalities through this pension bubble, which is what we’re really experiencing,” Cuomo said during his budget address Tuesday.
The proposal garnered positive reaction Tuesday from groups such as Unshackle Upstate and the New York Conference of Mayors.
“Anything that would give us pension relief would be appreciated,” said Amherst Town Supervisor Barry A. Weinstein. “We really don’t want to see pension costs go up again next year. It would really be a problem.”
But E.J. McMahon, senior fellow of the conservative Empire Center for New York State Policy, questioned whether the short-term gain would be worth the long-term trade-off for municipalities.
“If you’re a mayor who’s under the gun in Syracuse or Rochester or someplace and somebody is waving in front of you a savings equivalent immediately of 5 percent of your budget, that’s a pretty tempting apple,” McMahon said. “That is a very appealing short-term proposition. Now, in the long run ... to increasing degrees every year starting in 2020, you’re actually going to be spending more than you actually would be spending under the best-case scenario.”
Cuomo on Tuesday also proposed tightening language that affects how binding arbitration settlements for police and fire contracts are imposed. The governor’s proposal would create a cap for those settlements for communities “under fiscal distress.”
That proposal, combined with a continued commitment to provide relief from Medicaid expenses for counties and the pension stabilization proposal, was given cautious approval on Tuesday by groups seeking relief from state-imposed mandates on towns and school districts.
“Clearly there’s a lot more we have to do on mandates, but those three things will go a long way toward helping municipal governments and school districts stay underneath that 2 percent cap and give them some cost containment and predictability that they currently don’t have,” said Brian Sampson, executive director of Unshackle Upstate.
Stephen Acquario, executive director of the New York State Association of Counties, called the proposals “positive steps” given the perimeters under which the governor is working.
“Could the governor have done more? Absolutely,” Acquario said. “Could he have provided more state resources toward local county mandated programs? Yes.”
The governor, Acquario said, faced a number of pressures, including the impact of Superstorm Sandy, the proposed increases for school aid and the Medicaid relief already in the works.
“That pretty much tapped the available revenues that the state had,” Acquario said. “We’re trying to understand some of the proposals that he put out, but it looks like the governor acknowledges the mandated situation that the counties are sitting in and is trying to advance tools for local governments, county governments, to use to manage their finances.”
McMahon, however, said the governor sidestepped calls for further relief from state mandates.
The pension proposal, he said, “is basically something the governor has contrived as a way to get around the fact that he’s not really offering significant mandate relief,” he said.