Gov. Andrew M. Cuomo’s proposal to allow local governments and school districts to enjoy tomorrow’s pension savings today is being met with varying degrees of enthusiasm, from the Buffalo Public School District, which is embracing the plan, to Syracuse Mayor Stephanie Miner, who has criticized it.
Cuomo’s 2013-14 budget proposal includes a provision that gives local governments the opportunity to enjoy savings from a less-generous pension tier immediately, instead of waiting for employees in more generous tiers to retire.
Municipalities and school districts have complained about current pension payments, which are high now because the economy is not doing well, but should decrease when the economy improves.
Cuomo’s proposal allows local governments the option of paying a “stable rate” for 25 years, instead of paying varying amounts every year, as they have done.
Miner was Cuomo’s choice to be co-chairwoman of the state Democratic Party, but that didn’t stop her from publicly questioning the proposal. That drew a response from Lt. Gov. Robert Duffy, who said perhaps Miner would prefer asking for a control board instead.
Miner told the Associated Press that the governor’s proposal was pinned on “assumptions.”
The savings would diminish as the difference between what the local government or school district would pay under normal circumstances and the stable rate grows smaller. At some point, the stable rate will become higher than what local governments and school districts would pay if they did not choose upfront savings, as new employees are hired, replacing employees in more generous pension tiers who retire.
Buffalo Comptroller Mark J.F. Schroeder said while he appreciates Cuomo’s effort to give cities options, it isn’t something Buffalo needs to do, and he will urge the mayor to do without it.
Mayor Byron W. Brown and Erie County Executive Mark C. Poloncarz, through a spokesman, said they were reviewing whether the measure would be good for their governments but were glad to have the option.
The short-term gain of taking savings now could burden future mayors and comptrollers, Schroeder said.
For Buffalo, the savings in 2013-14 would be about $19 million, according to the state budget office, or between $16 million and $17 million, according to city calculations. The savings represent the difference between what the city is scheduled to pay in 2013-14, and a new “stable rate” provided for in Cuomo’s budget.
Municipalities would be locked in to the stable rate for 25 years, but the budget legislation allows the comptroller or pension fund trustees to adjust the time period if necessary based on market returns.
Barbara Smith, the Buffalo school district’s chief financial officer, said Friday that the pension option is a good idea for the district, because it gives annual predictability of what the expense will be and would save the district $8 million next year.
Deputy Erie County Comptroller Gregory G. Gach was less enthusiastic.
“You’re basically signing a mortgage, and you don’t know how much the mortgage will be,” he said.