The Business Council supports this legislation that will adopt a new pension tier for newly hired public employees, and save state and local governments an estimated $80 billion over the next thirty years.
New York has one of the highest pension burdens in the nation — second only to Alaska — and it is about to get worse: the state’s (i.e., taxpayer’s) required payment will soon skyrocket from its current level at $1.5 billion to $2 billion in 2014.
Our current pension system is already unsustainable, and the generational surge in retirees will mean that our younger population will be forced to carry the fiscal burden.
At a time when we are focused on growing our economy and increasing the number of good-paying, private-sector jobs in New York, it is counterintuitive to maintain a pension system that is hurting taxpayers and businesses and helping to drive away our best and our brightest citizens.
This legislation will not affect current employees, and would still offer a defined benefits system for the future workforce. Importantly, this legislation eliminates the use of padding tricks like overtime in pension calculations. It also offers certain state employees the opportunity to enroll in a 401K-style retirement account, an option that would also be available to new employees. Frankly, we believe the state should move all new employees to a defined contribution plan, as is the norm now in the private sector and in the public sector of many states, but we welcome this limited reform as an important first step.
New York needs to be taking steps to make New York more competitive. That includes finding ways to lower property taxes. As we have seen over the past several years, property tax increases affect jobs. In the last 10 years alone, pension growth represented 88% of property tax increases from city governments, 41% from county governments, 28% from villages and 22% from towns. Our property taxes are among the highest in the nation, and businesses pay 35% of all property taxes in the state. Businesses pay five times more in property taxes to localities than they do in corporate income taxes – more than $2, 300 per employee in property taxes.
Property taxes are a job killer, and the pension system is the major driver of property taxes. That is one of the reasons many of us supported the tax cap last year, to help drive a real discussion on mandate relief.
As we continue down the road to recovery, it requires that all of our state’s leaders foster an environment that supports local businesses, instead of continuing fiscally irresponsible policies that hurt businesses.
We respectfully ask you to support the implementation of Tier VI as proposed by the governor, and take a major step toward making New York more economically competitive.