If New York taxpayers had a motto, it would be: It can always get worse. If a costly and cushy pension giveaway succeeds, it will.
An unholy alliance including New York City Mayor Zohran Mamdani, Governor Kathy Hochul, Democrat legislative leaders and the state’s public sector unions are pushing to unravel commonsense, bipartisan pension reforms that were needed to avoid budget catastrophe more than a decade ago.
Back when Democrats did not have a supermajority trifecta of control over state government, Governors Cuomo and Paterson signed cost-saving reforms.
These reforms added new “pension tiers,” known as Tier 5 and 6, to the system. The 2009 and 2012 reforms included changes requiring public employees to pay up to 6% of their salary toward their pensions and increasing retirement ages. These affected new hires.
These helpful measures were a response to the cost of the pension system skyrocketing from less than $1 billion in 2000 to nearly $10 billion in 2010.
The unions are demanding earlier retirement and only 3% employee contributions, and who knows what else, undoing reforms and causing pension costs to explode. A conservative estimate from the Citizens Budget Commission has the cost at $1.5 billion per year across all levels of government, but the total will likely be higher.
This cost explosion will be thrown onto a state budget that has ballooned under Governor Kathy Hochul already, growing by $66 billion since 2020.
These costs would impact state and local governments alike, as localities are on the hook for the pensions of their own employees: $330 million for New York City, $480 million for school districts, $407 million for cities and towns outside New York City, and $242 million for the state.
The numbers make clear that the bulk of the burden will fall on local governments.
Local government associations have raised the alarm. “Any increase in employer pension contribution rates resulting from Tier 6 amendments would force local governments to make impossible choices: cutting essential services, eliminating positions, or seeking property tax increases that local taxpayers cannot afford,” said the Conference of Mayors, Association of Counties, and Association of Towns.
It is clear the pension giveaway would demand tax increases. New York already has the second-highest total tax burden in the nation, with an average property tax burden of $7,659 — the second highest in the U.S. That would go up.
In Albany, a slew of new tax hikes are being bandied about: a tax on gold and crypto, yachts, noisy helicopters, and even life-saving smokeless nicotine products.
Perhaps the highest-profile proposal would be the “pied-à-terre” tax for New York City, which Democratic-Socialist Mayor Zohran Mamdani has backed.
Unlike many local leaders, Mamdani has taken to lobbying for tax hikes and more money from the state to help the city pay for the porky pensions. At the same time, he declared a budget crisis, saying, “We need new revenue and we need a structural reset.”
Interestingly, more than 20% of New York government retirees live outside of the state. Even they know New York is unaffordable. And if the state and city accelerate the tax and spend path by giving in on this attack on Tier 6, life will only get more unaffordable.
Thanks to New York taking in more federal aid than 48 states and gaming Medicaid to the tune of $70 billion in federal support, the state’s unhinged budget situation is a concern for all American taxpayers. The state’s wild fiscal largesse cannot be sustained by New York taxpayers alone.
If any legislators are thinking that the recent increase in the federal State and Local Tax deduction cap — which allows New York taxpayers to write off their local taxes on their federal return — will alleviate tax hike pressure, they are wrong. The SALT increase will expire in three years, creating a massive shock for taxpayers.
This pension giveaway would be a total disaster for New York, driving taxes at all levels higher. Republicans must fight as hard as they can to stop it. Ultimately, it is Democrats driving the bus, and if they go over the cliff to please their unions, it should be on them.
