ALBANY — Gov. David A. Paterson on Tuesday proposed a steep rollback of some of the generous pension benefits that have been an alluring feature of government work for decades, initiating a contentious reckoning with public employee unions.
The governor is proposing to reduce benefits for newly hired state and municipal workers, including those in New York City, by placing them in a new pension category. The New York City portion of the plan was developed by Mayor Michael R. Bloomberg.
“We’ve made too many promises and asked for too few sacrifices,” the governor said during an address to the Legislature. “We’re going to have to change our culture as we know it.”
The pension proposal was part of an austerity budget unveiled by Mr. Paterson.
One of the most controversial elements of the pension proposal would require the city’s police officers and firefighters to work 25 years and reach age 50 before they qualified for a full pension. At present, they can qualify for a full pension after 20 years of work, regardless of age — a coveted perk known as “20 and out.”
“Giving with one hand while taking away with the other simply makes no sense,” said Patrick J. Lynch, president of the Patrolmen’s Benevolent Association, who said that the city had only recently granted raises that made it more competitive with suburban police forces.
“This proposed change to the pension for future police officers will undo any progress made on compensation issues,” he said.
Under the governor’s proposal, workers in the state pension system would have to work until they were at least 62, instead of 55. The changes would apply to all state workers, many city employees, including teachers, and employees of a number of municipalities outside New York City.
New workers would also have to contribute 3 percent of their pay to the pension system for their entire career; currently the contributions stop after 10 years of service. And workers would no longer be allowed to use overtime in their last year of service to bolster their future pension payments.
Mr. Paterson’s move is reminiscent of steps taken by many American corporations over the last two decades, including changes initiated by the Big Three automakers several years ago. While states are grappling with shortfalls amid the deepening recession, New York’s situation is particularly dire. Not only is the state faced with a $15.4 billion deficit, but New York’s main financial engine, Wall Street, has been diminished by the credit crisis.
Further, while savings from pension changes take years to fully pay off, the value of pension funds has already been depleted by the market’s decline.
Still, the governor’s budget will not pass without a major battle in Albany, and changes to the benefits of city workers require approval by the City Council.
Union leaders have close ties to lawmakers and have expressed outrage that years of negotiated benefits are being swept aside. The Web site of the Civil Service Employees Association called Mr. Paterson’s budget “possibly the worst in recent history.”
And some of the proposals have been floated before, and rejected, though the global financial crisis may have changed the political calculus even for legislators in Albany.
Mr. Paterson does have a stick to pressure unions into accepting his pension plan: layoffs. His budget proposes to lay off only 521 employees in a work force of nearly 200,000.
He demurred Tuesday when asked whether steeper layoffs could be expected if the unions balked at his demands.
“I don’t want to jump ahead of a negotiation or threaten the public employee unions,” Mr. Paterson said. “The public employee unions are saying probably the same things that most of us would say if we represented the workers, but inevitably they do have to come to a conclusion that there has to be some redress for this budget deficit.”
Other proposals by the governor call on current state workers to give back a previously negotiated 3 percent salary increase next year and defer a week’s pay until they retire. His budget would also require future retirees to significantly increase their contributions for health care coverage.
In the city, pensions for uniformed service members — who include police officers, firefighters, sanitation workers and corrections officers — would vest after 10 years of service rather than the current 5, meaning that at least 10 years of work would be needed to qualify for even a minimal pension.
The city would also change the way pension payments were calculated to mitigate the common practice of uniformed officers accumulating hundreds of hours of overtime in their final year to maximize their future benefits.
The governor’s office also said that to help finance pensions, the bill would require all new uniformed workers in New York City to contribute 5 percent of their salary until they have 25 years of service. For many uniformed workers, that 5 percent contribution would be a significant increase above what they paid now.
The Bloomberg administration estimated that the proposed pension changes would save the city $5.4 billion over the next 20 years.
Mayor Bloomberg was quick to applaud the proposal.
“Right now,” he said “we are paying full retirement benefits to people in their 40s. And especially as people are living longer, we simply can’t afford to do it forever.
“Our pension system is one of those areas where spending has grown to an unaffordable rate. And we simply have to find a way to rein it in,” Mr. Bloomberg said at a news conference on Tuesday.
One New York City detective, a 19-year veteran who spoke on condition of anonymity so as not to violate Police Department rules, said that “20 and out” was “one of my whole reasons for becoming a police officer.”
“I would say undoubtedly 95 percent of the people who come on this job, that’s a significant reason why,” he said. “They don’t do it for the money.”
Randi Weingarten, president of the United Federation of Teachers, said the budget was “essentially a de facto reopening of a contract unilaterally to cut wages” because it would require newly hired teachers to continue contributing 3 percent of their pay after 10 years, the point at which most current teachers stop.
But after years of Albany lawmakers sweetening pensions to please labor leaders, some analysts thought the governor needed to go much further.
“It’s a return to the early ’90s status quo,” said Edmund J. McMahon, director of the Empire Center for New York State Policy, a conservative research group. “I wouldn’t call it pension reform.”
Charles M. Brecher, research director for the Citizens Budget Commission, a business-backed watchdog group, praised the move.
“Pension costs have been growing rapidly,” he said. “Pension benefits are far more generous than what exists in the private sector, and it’s a necessary step to get some structural balance in the state and city budget.”
