Retirement Costs Dog Municipalities

By Cohoes Mayor John T. McDonald III

Rick Karlin’s August 8^th article in the Times Union, which you can reach here, is a reminder of the crushing burden local governments continue to struggle with – retirement costs. The article speaks to the practice of amortization or borrowing a percentage of retirement costs in order to minimize immediate costs with the tradeoff of paying the costs with interest down the road.

In Cohoes, we have been fortunate we have not had to tap this tool at this time. Additionally, we continue to be able to make the payment in December of each year as opposed to paying the now popular “late fee” for the following February payment. The borrowing, an idea approved by the legislature and encouraged by the state Comptroller, was in my opinion a solid statement of how bad things are getting for local governments as it relates to finances overall and pension costs in specific. When this legislation was passed, I was sure more than one legislator had to turn and close their nose as this is not sound financial practice but at the same time it is a true example of doing whatever one can do when there are no other viable and legal options.

Retirement costs will continue to dog local governments, their employees and the residents they serve going forward. Allowing today’s costs to be repackaged and saved for a later date reflects today’s times and we need to do more to lessen the burden on said local governments if we expect to keep property taxes in check and to continue to provide the services our residents have come to not only enjoy but expect.

One Response to “Retirement Costs Dog Municipalities”

1. Harvey Randall says:

   August 14, 2012 at 1:06 pm

   The traditional process in seeking “savings” with respect to public retirement systems of this State is to create yet another Tier in a “defined benefit plan” and provide that new members be enrolled in that new Tier as was most recently the case with the creation of a new Tier VI.

   Since 1971 I have advocated a different approach – establish a “defined contribution plan” [DCP]and enroll all newly appointed officers and employees otherwise required to join the New York State Employees’ Retirement System in this DCP in lieu of their becoming members in an existing “defined benefit” retirement plan.

   I believe that a viable DCP plan would:

   1. Require all new individuals otherwise required to join the New York State Employees’ Retirement System to enroll in a DCP;

   2. Require employer and employee contributions to the DCP be negotiated through collective bargaining pursuant to Article 14 of the Civil Service Law, the Taylor Law;

   3. Provide that DCP members “vest” employer and employee contributions to the DCP upon satisfactory completion of a specified period of service;

   4. Permit current members of New York State Employees’ Retirement System to elect to become members of the DCP; and

   5. Provide that the New York State Employees’ Retirement System administer the DCP plan by essentially expanding the existing “employee contribution” operations of the System, with, perhaps, a variable annuity option.

   Since 1964 enrollment in a DCP or “Optional Retirement Plan” instead of a defined benefit public retirement system of this State has been available to certain employees the State and its political subdivisions employed by the State University of New York, community colleges and the statutory contract colleges at Alfred and Cornell Universities.

   In the interests of “full disclosure,” in 1964 I served as Director of State University Personnel on the SUNY Central Administration staff and designed and drafted the legislation for SUNY’s Optional Retirement Plan, a defined contribution plan available to certain employees of the State University, the community colleges and the statutory contract colleges at Cornell and Alfred Universitites [see Education Law §390, et seq] and the following year drafted the legislation [See Education Law Section 398 et seq] creating the Special Annuity Program as authorized by Section 403(b) of the Internal Revenue Code. [See also Section 114 of the Education Law.] I subsequently assisted [the then] New York City Univerity System and the State Education Department in drafting their respective defined contribution “Optional Retirement Plans.”

   Harvey Randall

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