Bloomberg Urges Major Reform to Plug Pension Hole

(February 3, 2011) — New York City Mayor Michael Bloomberg has proposed big changes to the city’s pension system in an effort to save billions of dollars and obtain a reputation for taking a tough position against the city’s unions as he fights for reform in Albany.

The proposals by Bloomberg reflect the sentiment among mayors and governors around the nation, who describe a bleak state of public schemes, with the picture only getting worse. Already, the governors of New Jersey, California, Washington, Virginia, and Massachusetts have publicly endorsed such reforms. In New Jersey, Governor Chris Christie addressed the state General Assembly on January 11, saying the unfunded liability of the New Jersey Division of Investment would grow to a “staggering” $183 billion from the current $54 billion within three decades. And in his State of the Commonwealth address, Virginia Governor Robert McDonnell proposed that state employees contribute 5% of pay to the $51.9 billion Virginia Retirement System.

“We will work to pass several basic reforms to bring our pension system into the 21st century,” Bloomberg said in his annual State of the City Address last month, describing his mission to solve the city’s looming $2.4 billion deficit. With costs for New York City taxpayers only heading higher, Bloomberg said he wants lawmakers to hike the retirement age for non-uniformed city employees to 65. Additionally, he announced that he wants to reduce the cost of the city’s pension system by consolidating some of its administration and raising the retirement age for new employees.

In his State of the City address, Bloomberg said New York City’s pension costs would rise to $7 billion in 2011 from $1.5 billion in 2001. To put the rate of increase in perspective for New Yorkers, the mayor compared the rising costs of pensions to the rising costs of riding the subway, estimating that if subway fares had risen at the same rapid pace as pensions since 2001, it would cost $7.05 to ride the subway instead of the current $2.25.

Under Bloomberg’s proposed pension plan, New York’s newly hired public workers would receive less generous pension benefits and would be forced to pay more and work longer for them. The mayor’s pension reforms follows New York Governor Andrew M. Cuomo’s criticism of the state’s Judiciary for “not participating” in his efforts to shrink a $10 billion gap in the 2011-12 state budget. Cuomo’s plan would involve a reduction of the overall state spending by 2.7%, representing the first proposed reduction by a governor in 15 years.

Bloomberg’s proposals could help save the city at least $200 million a year, with billions of dollars projected in future savings, the New York Times reported. He has said that the current pension system would bankrupt the city.