Niagara Gazette

April 22, 2013

State official sounds off on local pension relief

Staff reports
Niagara Gazette

Niagara Gazette — Pension relief is not in the immediate future for cash-strapped local governments.

Eight months before it has to adopt the 2014 county budget, the Niagara County Legislature already knows it'll have to come up with almost $16 million to pay next year's bill from the state Local Employee Retirement System.

In a carryover budget, that one spending line consumes 20 percent of the county tax levy, legislator Richard Updegrove, R-Lockport, observed.

The bills going out to counties, cities, towns and villages will not be lower in 2015, according to Thomas Nitido, state deputy comptroller for the New York State and Local Retirement System. That is the last year in a five-year plan by the comptroller, the sole trustee of the state Common Retirement Fund, to recover a $45 billion loss in fund value in 2008-09.

Nitido addressed the legislature last week to explain L.E.R.S., how it's funded and why the comptroller won't reduce contribution rates charged to 3,000 local governments statewide.

L.E.R.S. is a traditional, defined-benefit plan that guarantees retired government workers specific monthly benefits for life, regardless of economic conditions. The state Constitution prohibits benefit reduction.

Pension funds are invested and market performance drives the contribution rates that are charged to employers. Contribution rates are expressed as percentages of a municipality's annual payroll. 2014 average pension bills will consist of two charges, 28.9 percent of police and firefighters' payroll, and 20.9 percent of all other payroll.

L.E.R.S. paid out $8.9 billion in benefits to retirees last year. According to Nitido, $7.2 billion went to retirees who reside in New York state.

The average pension is $20,200 for retired local government workers and $42,000 for retired police and fire officers. The averages for 2012 retirees are $29,600 and $49,000.

Of every pension dollar paid out in 2012, 15 cents came from employers, 3 cents came from employees and 82 cents came from fund investment earnings, Nitido said. The national average is 65 percent from investment earnings, he added.

In 2012, L.E.R.S. paid out $104.5 million in benefits to 5,321 retired members in Niagara County. That does not include payouts to retired educators, who belong to the Teachers Retirement System.

The comptroller manages the pension fund to ensure there's enough money to pay promised benefits to more than 1 million E.R.S. members, current workers as well as 403,000 retirees.

Between investment returns, employer and employee contributions, the benefits are being paid for while members are working, Nitido said. As a result, "we are better poised than most systems in the country for the future."

Annual employer contribution rates are set based on the Common Retirement Fund's performance in the prior five-year period. Municipalities' pension costs were minimal in the 1990s, when the fund benefited from a dot-com-driven market boom. They rose, then decreased, throughout the 2000s, and then shot up significantly in 2011, reflecting the '08-'09 market crash. Every year since, contribution rates have increased 2 percent or more.

In 2016, five years after the crash, "rates will definitely head down," Nitido predicted.