New York cuts pension benefits for public workers

The New York Legislature on Thursday passed a plan supported by Gov. Andrew M. Cuomo that will cut retirement benefits for future State and Local government workers. This plan will save over $80 billion for the state and local governments over the next 30 years. This would largely affect the middle class, blasted the union officials. Spiraling pension obligations are one of the top financial problems faced by State and Local governments across the United States. For New York’s municipalities, pension costs have risen more than 650 percent since 2002 to $12.2 billion in 2012, Cuomo said.

The new law creates a sixth tier of smaller benefits  for future State and local Government workers ranging from 3  percent for who earn $45,000 to 6 percent whose salary is $100,000 per annum. Further, the average salary taken into consideration for calculating benefits will be last five years instead of three and only $15,000 of a workers overtime salary will be taken for adjusting inflation.

“Without this critical reform, New Yorkers would have seen significant tax increases, as well as layoffs to teachers, firefighters and police,” Gov. Andrew M. Cuomo said in a statement. AFL-CIO President Mario Cilento says “Once again, middle class New Yorkers will pay the price for Wall Street’s misdeeds” and he also thinks it is an assault on long- term economic security of nurses, teachers, firefighters, and other workers who already faced layoffs, furloughs, wage freezes and now pension benefits cuts.

New York State’s pension fund is exceptionally funded with $140 billion unlike Illinois, for example, which has an $83 billion liability but the New York annual payments are enormous.Michael Bloomberg, Mayor of New York city, who backed the law with the help of politicians, praised the bill. He said the skyrocketing pension payments have been cutting into local Governments delivery of core services.

Under the bill, new, non-unionized employees earning at least $75,000 a year for the first time will have the option of selecting a 401(k) defined-benefit thrift plan. Due to the mounting pension payments, the State and local Governments are under pressure to reduce the rate of interest on pension fund investments. California’s pension fund, one of the largest in the country, opted to lower their interest rate to 7.5 instead of 7.75. The New York City’s Actuary has recommended bringing down the return from investment to 7 percent from 8 percent.

The pension bill was enacted with Cuomo’s other top priorities including legalizing casinos, expanding the state’s criminal DNA database, and redrawing election districts.

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