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State lawmakers are proposing changes to pensions for state and local government workers in New York that would increase costs by nearly $4 billion, with the city of New York facing an immediate $163 million increase in annual pension costs. The proposed change would calculate pensions based on a worker’s final three years of salary, potentially increasing their pension as they would typically earn more in their last few years. The Empire Center for Public Policy warns that this would force school districts and local governments to either cut programs or raise taxes, with the city of New York being the most impacted.

The proposed pension changes are supported by Democrats in the Assembly and State Senate as part of the ongoing budget process. This would retroactively increase pensions for workers who retired in the past two years and raise future pensions for roughly half of New York’s public-sector workforce as they retire. Former Gov. Andrew Cuomo had previously approved Tier 6 changes to control pension costs, and lawmakers are now looking to expand pension benefits for government workers.

The proposed pension sweetener would add billions in debt to New York City’s pension plans and the New York State and Local Employees Retirement System in the coming decades. Teachers with higher salaries stand to benefit the most from the potential changes. Labor leaders, including United Federation of Teachers president Michael Mulgrew, are lobbying for the change, arguing that it provides real retirement security for members, despite opposition from the Empire Center and concerns about the impact on taxpayers.

Legislators, including Assembly Education Committee Chairman Michael Benedetto, have expressed concerns over the proposed pension changes, citing worries about recruiting and retaining teachers in the city public school system. The Empire Center believes that the plan is a giveaway to unions ahead of the 2024 elections, rather than a necessary solution to a workforce crisis. Proposals drafted by state Sen. Robert Jackson and Assemblywoman Stacey Pheffer Amato have gained support from Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie.

While Gov. Kathy Hochul has the power to block the pension-padding measure in budget negotiations, she has not taken a firm stance on the issue. Hochul previously agreed to roll back some pension changes sought by unions in 2022, reversing laws that required new government workers to be vested in the pension system after 10 years instead of five. New York is known for offering generous government benefits, including rules that allow elected officials to “double dip” by collecting a pension while still working. This practice is exemplified by Staten Island’s District Attorney Michael McMahon and his wife, state Judge Judith McMahon.

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