New York’s local governments have borrowed about $200 million this year from the state’s retirement fund, $156 million more than last year, when the program to spread out pension costs was implemented.
About 165 of more than 3,000 local governments, school districts and agencies opted into the program, which requires that they pay interest to the $140.3 billion fund on the deferred portion of their pension payments, Eric Sumberg, a spokesman for Comptroller Thomas DiNapoli, said in an e-mail today. The state also plans to use IOUs for at least $562.9 million as part of the program this year, Sumberg said.
“While the state’s pension fund is one of the strongest performers in the country, costs have increased due to the Wall Street meltdown in 2008-2009,” DiNapoli, a 58-year-old Democrat, said in a statement. “Amortizing pension costs is an option for some local governments to manage cash flow and to budget for long-term pension costs in good times and bad times.”
New York’s retirement fund, the third-biggest 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. To keep it funded after losses incurred in the financial crisis, the system has increased the payments made by local governments.
By 2015, 35 percent of local budgets will be consumed by pension costs, up from 3 percent in 2001, Governor Andrew Cuomo said yesterday at a meeting of the New York State Conference of Mayors and Municipal Officials in Albany, the capital.
Under similar circumstances, other states, including Illinois, have issued bonds to fund their retirement plans.
New York’s voluntary plan to defer some cash payments was created in 2010 by DiNapoli. It allows state and local governments to hold off on paying a portion of pension costs if they agree to pay interest on the deferred amount. The plan is meant to smooth out fluctuations in the rate public employers pay to the system by also allowing localities to build reserve funds when earnings on the fund are high.
Last year, local governments deferred $43.4 million, Sumberg said. The totals for this year were reported earlier today by The New York Times.
“It doesn’t make the obligation go away, but gives you the opportunity to amortize, over a period of time, the increase,” DiNapoli said yesterday at the mayors conference. “It gives you help right now, not 30 years from now.”
Cuomo is pushing for a pension overhaul he says would save $113 billion over 30 years for public employers, including New York City, in part by raising the retirement age to 65 from 62 for most workers and offering a 401(k)-type option to new ones.