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Cuomo’s Pension Plan Rejected by New York Assembly Democrats

New York (STONY1) Assembly Democrats rejected Governor Andrew Cuomo’s proposal to raise the retirement age and offer a 401(k)-type option to future workers in their version of the budget.

The Assembly, controlled by Democrats, approved a plan without the pension changes by 92 to 49 today. The Assembly and the Republican-controlled Senate, which also passed a budget proposal today, will now try to negotiate a deal on a spending plan before March 31. The governor’s pension proposal may still be agreed upon separately from the budget process, said Assembly Majority Leader Ron Canestrari.

Cuomo, a Democrat, has said his overhaul of the pension system will save local governments and the state $113 billion over the next 30 years as it raises the retirement age to 65 from 62 for most new workers. The proposal has drawn the governor into a battle with the state’s public-worker unions and Comptroller Thomas DiNapoli, a fellow Democrat and the sole trustee of the $140.3 billion pension fund.

“It’s not part of our budget and will be handled separately,” Canestrari said March 9, when the Assembly finished its budget plans. “Negotiations are under way, and they’re pretty intensive.”

Cuomo Cites Layoffs

Lawmakers in both political parties are reluctant to back the pension changes because they receive campaign cash from the unions, Cuomo said in an interview on WGDJ in Albany today.

“It’s not about the merits,” Cuomo said. “If you don’t have pension reform, you’ll be laying off thousands of public employees.”

The Senate Republicans didn’t include Cuomo’s pension overhaul in their budget proposal either, though they did include a statement supporting it. The resolution passed with a 38-to-21 vote today.

“We are committed to pension reform to ease the skyrocketing costs facing local governments and school districts,” Scott Reif, a spokesman for Majority Leader Dean Skelos, a Long Island Republican, wrote in an e-mail yesterday. “The governor’s plan continues to be the subject of ongoing negotiations.”

The Assembly’s budget proposal also cuts the tax rate to zero from 4 percent for joint filers earning $25,000 or less, the proposal said. Senate Republicans said in a statement e- mailed March 7 that their plan will cut the corporate tax rate for 200,000 small businesses to 5.5 percent from 6.85 percent, a $65 million reduction.

MTA Cuts

The Republican proposal also would cut $770 million that Cuomo’s budget appropriates to the Metropolitan Transportation Authority’s capital program, and would deny a $7 billion increase to the authority’s debt cap, the resolution says. Cuomo’s budget proposes raising the largest U.S. transit agency’s debt limit to $41 billion from $34 billion, the governor’s budget says.

Assembly Speaker Sheldon Silver, a Manhattan Democrat, said last week the governor must work out an agreement over Cuomo’s pension overhaul with the unions before the house will vote on the measure. Cuomo met with union leaders March 6 to discuss pension changes and other items in the budget, he said during a March 8 press conference in Albany, the capital.

“Discussions continue, and we’ve made it clear that a 40 percent cut in retirement benefits for new employees isn’t acceptable,” said Carl Korn, a spokesman for New York State United Teachers, the state’s largest education-worker union, in a telephone interview yesterday. “We continue to fight to protect retirement security.”

Rising Costs

Cuomo has said pension costs will consume 35 percent of local-government budgets by 2015, up from 3 percent in 2001. New York’s retirement fund, the third-largest U.S. public pension, had 101.5 percent of the money needed to pay its obligations in 2010, better than any other state, according to an annual study by Bloomberg Rankings.

The governor put the pension changes into his $132.5 billion budget proposal for the fiscal year that begins April 1. He has said that if lawmakers send him a spending plan without the measure, he’ll force the Legislature to choose between shutting the government or passing his plan by using a so-called budget extender. The process is used to keep the government operating when there’s no agreement on the budget. The governor has the power to put almost any item in an extender.

To contact the reporter on this story: Freeman Klopott in Albany, New York, at fklopott@bloomberg.net

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

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