Despite hopeful signs for municipalities, pension costs remain a crushing burden - The Buffalo News

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Despite hopeful signs for municipalities, pension costs remain a crushing burden

The good news for New York municipalities and their taxpayers is that after years of increases in their mandatory pension fund contributions, those costs are about to dip. The bad news is that they will remain alarmingly high, at least for now, and that the taxpayer-funded cost of teacher pensions continues to rise.

There is no choice, ethically or legally, but for municipalities to honor the retirement benefits they agreed to with their workers, however unwise they may have been. But with the costs of health care having exploded since many of those contracts were approved and with most of the rest of the American economy having moved away from defined benefit retirement agreements, municipalities and school districts are taking it on the chin.

Still, the report by State Comptroller Thomas P. DiNapoli provided welcome news after four consecutive years of rising contribution requirements. The state retirement fund is supported by investments, and when the stock market tanked at the start of the Great Recession, so did the value of the fund. Towns, villages, cities and counties had to dig deeper, diverting funds from other budget lines and raising taxes to meet the obligation.

That is still occurring. This year’s average contribution rate for state and local governments in New York is scheduled to reach its highest level since 1974. But for the 2014-15 year, the rate is expected to decrease slightly. The benefit to Erie County is expected to top $1 million. Better still, with the economy improving and stock market rising, costs may continue to decrease in subsequent years.

The stock market, in fact, has been rising for several years now, but municipalities have been hamstrung by a five-year averaging of the retirement system’s investment performance. That’s a policy that bears reviewing, given the pain it has inflicted on taxpayers over the past several years.

The state has already moved to lessen the burden of future retirees, creating two new pension tiers in recent years for new hires. They were important steps, even though their effect won’t be felt for decades. Additional actions may be called for, especially given that rates remain high. A slight decline from a punishing level still leaves the rates at a punishing level.

Peter Baynes, executive director of the New York Conference of Mayors and Municipal Officials, noted that the new rates are 90 percent higher than the average rate over the past 40 years. That will leave local governments under pressure to raise taxes or cut programs.

The decrease in the pension contribution rate is undeniably welcome news, especially if it marks the start of a downward trend. “But make no mistake,” Baynes said, “despite today’s announcement, pension bills will continue to inflict pain at the local level.”

That means local governments will have to continue to budget cautiously and that they and Albany will have to continue to hold the line on pension costs, negotiating new agreements where they can and evaluating whether still another pension tier needs to be created for future employees.

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