Bloomberg Proposes Pension Cuts for Future NYC Workers

Future New York City workers wouldn’t receive full retirement benefits until age 65 and couldn’t count overtime in calculating retirement pay under proposals by Mayor Michael Bloomberg.

Bloomberg offered the plan at a meeting yesterday with the Municipal Labor Committee, composed of the unions representing the city’s 300,000 workers, his press office said in an e-mail. The changes, some of which the mayor has suggested in the past, have been opposed by union leaders. While the proposal would need state lawmakers to create a “new tier” of pensions applicable to future workers, current employees would keep their benefits.

Pension costs will amount to about 12 percent of New York City’s $67.5 billion budget for the year beginning July 1, according to the spending plan. Annual costs, now about $7.5 billion, are expected to increase to about $9 billion by 2016, from $1.4 billion in 2002, the mayor has said.

“It’s clearly a sign that the mayor doesn’t care whether he has a relationship with the city workforce,” said Michael Mulgrew, president of the United Federation of Teachers, which represents more than 100,000 school employees. “He’s changed his tone and it’s completely disrespectful.”

Union’s Agreement

Mulgrew said that in 2009 the union agreed to save the city $100 million a year with future members getting reduced pension benefits and longer service requirements before retiree eligibility for health care.

“He always leaves out the fact that this problem was caused by Wall Street’s meltdown, not anything the workers did,” Mulgrew said. He vowed to persuade the Legislature in Albany to reject Bloomberg’s proposals.

“We won’t even discuss it with the mayor,” Mulgrew said.

Sisa Moyo, a spokeswoman for Assembly Speaker Sheldon Silver, a Manhattan Democrat, didn’t return requests for comment. Senate Majority Leader Dean Skelos, a Republican from Rockville Centre, Long Island, told the Association for a Better New York last week he would favor pension-benefit reductions for future employees.

City Comptroller John Liu said he would support the mayor’s request that the Legislature grant the city power to negotiate with city unions over pensions. At the same time, he rejected any “proposal that breaks a promise,” particularly to police and firefighters.

Pension Gaps

Cities, counties and states across the U.S. face a $3.6 trillion gap between pension assets and promises made to retirees, according to a study by Robert Novy-Marx of the University of Rochester and Joshua Rauh at Northwestern University.

While the total is more than three times the $1 trillion deficit projected a year ago for states alone by the Pew Center on the States, Novy-Marx and Rauh say governments understate their liabilities because of over-optimistic assumed investment returns.

In New York, the nation’s most-populous city, most employee benefits vest after five years and workers may retire at 57. Teachers with 27 years of service are eligible at 55. The new rules would require all new workers to reach 65 to collect full benefits, the mayor’s office said.

Civilians would also have to contribute 5 percent of their pay. Current employees pay 4.85 percent for 10 years, then 1.85 percent for the next 20. Teachers now contribute 4.85 percent for 27 years, and 1.85 percent thereafter.

Workers Sue

“This is not just an attack on the city workers,” said Municipal Labor Committee Chairman Harry Nespoli, who is also president of the sanitation workers union. “It’s an attack on the middle class.”

The mayor should negotiate with individual unions, he said.

“With the proper attitude he might find unions willing to make an adjustment,” he said.

Public workers in Colorado, South Dakota and Minnesota are already suing their states, which are among 18 trying to reduce pension costs by increasing employee contributions, raising the retirement age or curbing cost-of-living increases.

Governor Andrew Cuomo’s administration is reviewing the mayor’s proposal, said Joshua Vlasto, Cuomo’s spokesman.

“As the governor has said since the beginning of his campaign, he is committed to reforming the pension system in order to reduce costs,” Vlasto said in an e-mail.

The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.

To contact the reporter responsible for this story: Henry Goldman in New York City Hall at hgoldman@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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