New York Governor Andrew Cuomo’s changes to pension benefits for future workers will improve the ability of the state and its local governments to manage retirement costs, Moody’s Investors Service said.
“The newly enacted reforms are a critical step in managing longterm pension liabilities,” Moody’s said in a report today. “The benefit to governments will grow as the labor force is replaced with new employees.”
Lawmakers approved a measure last week that raised the retirement age to 63 from 62, increased employee contributions and offered a 401(k)-type option to nonunion workers earning at least $75,000. Cuomo, a 54-year-old Democrat, estimated the changes -- which don’t affect current employees -- will save state and local governments $80 billion over the next 30 years.
“While we have heard much political commentary, this report from an unbiased, qualified financial expert brings clarity to our reforms and their impact,” Robert Megna, Cuomo’s budget director, said in a statement.
Since 2009, investment losses in the $140.3 billion New York retirement fund, the third largest U.S. public pension, have resulted in projections that the contribution rate paid by the state would double over the next five years, Moody’s said.
Now, New York’s contribution rate will remain an “affordable” 2.4 percent of projected operating revenue, the report said. A program created by Comptroller Thomas DiNapoli, the sole trustee of the state retirement fund, allows governments to spread out their pension payments.
“Although the state’s near-term pension costs will remain manageable, the adopted pension reform will provide budgetary savings for the state’s long-term exposure to this significant liability,” the report said.
A record 43 states from 2009 through 2011 cut public-pension benefits to reduce costs following the longest recession since the 1930s, the National Conference of State Legislatures said in a report released March 14.
New York’s retirement fund had 101.5 percent of the money to pay its obligations in 2010, better than any other state, according to an annual study by Bloomberg Rankings.