David A. Paterson and the state’s public employee unions announced an agreement on Friday that would reduce pension benefits for future public employees and save the state billions of dollars in an attempt to control ballooning costs for retirees.
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Andrea Mohin/The New York Times
Gov. David A. Paterson, arriving at a news conference on Friday, called a pension deal “a huge win” for state taxpayers.
To win their support for the deal, the governor provided the unions with significant incentives and backed off earlier demands for concessions from current employees.
Mr. Paterson will shelve his plan to lay off 8,700 workers and will drop a proposal to require existing workers to give up their 3 percent annual pay raise this year and to defer a week’s pay. In addition, 4,500 workers will be offered $20,000 buyouts.
Paterson administration officials said the agreement would save the state $30 billion over 30 years, but much of the savings will not be realized for another decade.
“This agreement is a huge win for New York’s taxpayers and will lead to the most significant reform of our public pension system in decades,” the governor said in a statement. “This is real reform to the pension system, which will substantially reduce costs to the taxpayers of New York State.”
The agreement will raise the retirement age for future employees from 55 to 62, and require them to contribute 3 percent of their salaries to their pensions for their entire careers, instead of for their first decade of service, which is the current requirement.
New workers will not become vested in the pension plan until they reach 10 years of service, rather than the current five. The deal will also limit the amount of overtime that employees can use in their last years of work to increase their pension benefits.
The agreement requires legislative approval, though endorsements by the governor and the labor unions virtually assure its success.
The deal covers state workers and local governments outside New York City; the Paterson administration hopes to negotiate a similar agreement for New York City employees, but city unions are adamantly opposed to doing so. New York City has its own retirement system. The deal also does not affect police officers, correction officers, teachers and firefighters.
The urgency of the need for changes in retirement benefits was underscored last week when the state comptroller’s office reported that the pension fund, hobbled by losses amid the market’s collapse, had shrunk to $109.9 billion at the end of March from $153.9 billion a year earlier.
The deal comes days after Mr. Paterson shocked and angered police and fire union leaders by refusing to allow new officers and firefighters across the state to continue to enroll in enviable pension benefits that were phased out in the 1970s for other public employees. The governor vetoed routine legislation that would have extended the benefits — similar bills have been signed by a series of governors going back to 1981.
While his veto was praised by budget watchdogs as a sign of rare resolve from the governor, his latest labor deal received mixed reviews.
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