We recently posted an article on Governor Cuomo’s pension smoothing proposal, referred to as the “Stable Rate Pension Contribution Option,” wherein we explained the legislative proposal, which would permit municipalities and school districts to reduce their Employer Contribution Rate (ECR) below what it would otherwise be now by agreeing to pay a flat rate going forward for a period of years to be determined by the state comptroller and the Teachers’ Retirement System, thereby accelerating their Tier VI savings to save money now. Since the proposal was unveiled in the governor’s budget proposal, there has been a great deal of discussion, with a variety of views being expressed. Some mayors, including Tom Richards of Rochester, have expressed support for this proposed legislation, arguing that it would provide sorely needed immediate financial savings as he struggles to close a projected $30 million shortfall. Even the New York State Conference of Mayors has expressed some support for the plan, calling it a worthy option for municipalities’ consideration. Others, such as Syracuse Mayor Stephanie Miner, have been vocally critical of the measure, asserting that it detracts focus from the more serious fundamental issues facing cities, such as declining tax bases, aging infrastructure and the need for substantive mandate relief. (Nonetheless, Mayor Miner did not rule out having Syracuse take advantage of the lower rate if the initiative were to be enacted.) The New York State United Teachers union has put its support behind the proposal. And although New York State Comptroller Tom DiNapoli initially appeared to be dubious of the initiative, he subsequently announced that he has commissioned a study of the proposal. Finally, the Citizens Budget Commission this week wrote letters to Comptroller DiNapoli and the president of the Teachers’ Retirement System, urging them to reject the proposal, saying that it would endanger the financial viability of the pension plans.
We will continue to monitor views on this proposal and its progress throughout the budget process.