Labor & Employment Law

Following his veto of a bill to provided for the temporary extension of Tier II retirement that would provide Tier II benefits to all new police officers and firefighters, matching the benefits of current employees, Governor David A. Paterson urged the Legislature to enact ?a new and less costly tier of pension benefits for public employees? that would result in substantial savings of $48 billion or more over the next thirty years for local governments and the State.

Governor Paterson?s Tier V legislation would:

1. Give the State and local governments the right to opt into a less costly pension plan for police officers and firefighters. Components of this new optional tier for police officers and firefighters include creating a minimum retirement age of 50 and increasing the minimum years of service required for most individuals to collect a pension from 20 to 25;

2. Create a new and less costly pension benefit for New York City police and firefighters; and

3. Establish a new, mandatory pension tier for civilian employees that would, among other reforms, reinstate employee contributions after ten years of service, increase the minimum retirement age from 55 to 62, and restrict the use of overtime in pension calculation.

These reforms, in accordance with the New York State Constitution, would only apply to new employees.

In his veto message for Senate Bill 1409, Governor Paterson indicated that he would be willing to enact legislation similar to the vetoed bill, but only if a lower-cost option for police officer and firefighter pensions, along the lines of his program bill, is provided for the State and localities that choose it.

The veto message stated that while this legislation had been routinely extended in the past, ?these are not routine times.? In particular, the message noted the recent report of the State Comptroller that the pension system lost 26 percent of its value in the last fiscal year, which will necessitate higher pension costs for the State and localities.

The Governor?s veto message follows:

VETO MESSAGE No. 5 - TO THE SENATE:

I am returning herewith, without my approval, the following bill: Senate Bill Number 1409, entitled:

"AN ACT to amend the retirement and social security law, in relation to the membership of police officers and firefighters"

This bill would extend statutory language ensuring that all police officers and firefighters receive the generous pension benefits provided under "Tier II" of the New York State pension system, so that new employees who first enter the system between July 1, 2009 and June 30, 2011 receive such benefits. Participants in Tier II may retire at half pay in twenty years, and do not generally make pension fund contributions.

The extended provision was first enacted in 1981. From 1976 to 1981, under Retirement and Social Security Law Section 501, the Comptroller performed a calculation on the relative costs of Tier II and less generous Tier III benefits, to determine in accordance with a statutory formula which benefit would apply to particular titles, a calculation that consistently placed police officers in Tier II. By 1981, however, it appeared that some police officers would soon be placed in Tier III, and this legislation was enacted to prevent that eventuality. The sponsors of the 1981 legislation indicated that the change was necessary "temporarily," until a review of police and fire pension benefits was conducted. Notwithstanding this statement, and the growing expense imposed on the State and localities by police officer and firefighter pension costs, this bill has been extended routinely since its initial enactment.

But these are not routine times.

The State and localities are hemorrhaging revenue at an alarming rate due to the recession and financial crisis. The State Comptroller announced last week that the New York State Pension Fund lost 26% of its value in the most recent fiscal year. This decline will inevitably require significantly higher contributions from the State, and from localities already in significant financial distress.

Police officers and firefighters have earned the State's gratitude, and they should be well-compensated upon retirement. But that does not mean we can continue the present, unaffordable pension system, without enacting measures to reduce costs.

I have submitted legislation, known as "Tier V," to address these problems by making certain cost-saving changes for new entrants into the public pension system, while still providing a high level of benefits for public retirees. With respect to police officers and firefighters, "Tier V" includes a lower-cost benefit for New York City, and allows other localities, and the State, the ability to opt into a lower-cost plan if they choose. I am willing to amend that legislation to make clear that, where the State or a locality does not opt in to the new plan, Tier II will apply. But I am not willing to ignore the present reality, and simply re-enact the same provisions that have contributed to New York's financial straits, without accompanying reform.

The bill is disapproved.

(signed) DAVID A. PATERSON