Say Paterson Pension Extender Veto Could Put Systems in Chaos

GOVERNOR PATERSON: Unintended consequences?

Governor Paterson has sought to increase the pressure on city police and fire union leaders to agree to major pension changes for future members by threatening to veto a bill that extends a variety of temporary pension rights for job-related illnesses and benefits for surviving spouses, union officials said last week.

But one official whose union is not directly affected said the "general extender" bill at issue also covers broad matters such as a continuation of Tiers 3 and 4 of the pension system and predicted a veto would create nightmares for both state and city officials.

'Tier 1 All That's Permanent'

"Other than Tier 1, there's no pension tier that's permanent," said the official, who spoke on condition that he not be identified. If the general extender was vetoed, he said, "It throws the whole state into chaos."

Lou Matarazzo, the legislative director for the Detectives Endowment Association, the Captains Endowment Association and the Public Employee Conference, said that Mr. Paterson's decision in early June to veto an extender bill continuing Tier 2 pension benefits for future cops and firefighters "set off a domino effect because of the general extender bill that's still hanging out there."

UNEQUAL SACRIFICE BEING DEMANDED: Lou Matarazzo, a former Patrolmen's Benevolent Association president who is now a lobbyist for the NYPD Detective and Captains' unions, says city and state officials are demanding far greater pension changes for cops and firefighters than were sought for civilian employees.

The original assumption, he explained, was that if the unions didn't agree to a Tier 5 pension plan that would sharply decrease benefits, future members would be placed under Tier 3, a plan that has included only Correction Officers for the last quarter century. But should Mr. Paterson veto the general extender, Mr. Matarazzo said, Tier 3 "is not even in existence."

Virtually all public employees other than cops, firefighters and correction officers hired over the past 33 years by the state, the city and other municipalities are members of Tier 4 of the system. That, too, comes up for renewal every two years as part of the general extender bill.

UFA, PBA Not Talking

A spokeswoman for the Governor could not be reached for comment. Calls to Uniformed Firefighters Association President Steve Cassidy and Patrolmen's Benevolent Association head Patrick J. Lynch, the two men who would ultimately make the decision on accepting pension changes for new hires, were not returned.

Police and fire union leaders have balked at discussing an inferior pension tier for new members. Initially they had hoped to persuade both houses of the State Legislature to override the Governor's Tier 2 veto, but the animosity between Democrats and Republicans in the State Senate that's developed over the past three weeks virtually precluded the possibility that they could unite in sufficient numbers to provide the twothirds majority that would be needed.

A group of more than 40 police unions has spoken with Mr. Paterson's Counsel, Peter Kiernan, about considering continuation of Tier 2 for the moment while a special commission studied appropriate changes in the pension structure for police and firefighters.

'City's Asking Too Much'

"I think that Kiernan was looking for the unions to make a deal, but the city was asking too much," Mr. Matarazzo said in a June 23 phone interview.

Mayor Bloomberg has described the pension costs for all city employees as too high to sustain over the long term, with the problem most acute regarding cops and firefighters because their benefits are the most generous. They are permitted to retire at full pension after 20 years' service at any age; the Tier 5 bill submitted by the Governor at the Mayor's request would require future hires to work at least 25 years and be at least 50 years old to qualify for full benefits. It would also sharply restrict the amount of overtime that could be used in calculating their final pension allowances.

That bill also eliminates other pension related benefits for future members of the two forces, including one guaranteeing that the spouses of those killed in the line of duty receive the equivalent of their final year's salary through a combination of basic pension, a cost-of-living adjustment and Social Security, for the remainder of their lives. Also targeted for extinction is the Variable Supplements Fund, which was derived from stock market profits and provides $12,000 a year to retired cops and firefighters. The Mayor has been helped in his campaign to discontinue this benefit by the business-funded Citizens Budget Commission and the New York Post, which have derided the benefit, which is paid every December, as "Christmas bonuses."

"That's not a Christmas bonus," Mr. Matarazzo said heatedly, noting that the VSF was negotiated by the police and fire unions 40 years ago in return for their permitting their pension funds to invest in the stock market, and the current payments were part of a collective-bargaining settlement reached with the Koch administration two decades ago. "We paid for it, and we negotiated it."

'Won't Offer Immediate Fix'

He also questioned the rationale for making major pension changes, saying they would have little impact on the budget problems that are currently being grappled with by both the city and state. "If anybody's looking for an immediate fix, they're not going to get it from these Draconian measures," Mr. Matarazzo said.

The lingering uncertainty about the pension plans is particularly dicey, he continued, because of the stalemate in the Senate and the likelihood that even if it is resolved, retirement system changes may not be given the same priority as issues like mayoral control of the city schools and sales tax hikes here and for other localities.

It is expected that after adjourning for the summer, legislators will return sometime this fall to deal with unfinished business, but Mr. Matarazzo said, "Once the houses start leaving, you can call special sessions but [the Governor would] have to give messages of necessity on" pension items, whether new or extenders.

Tier 3's Mixed Bag

If the Governor doesn't veto the general extender bill, future cops—a class of whom are scheduled to enter the Police Academy shortly—and firefighters would be placed under Tier 3 as of July 1. While Tier 3 benefits are less-generous than those under Tier 2 —among them would be the requirement that cops and firefighters work 22 years before qualifying for a full pension—there is one conspicuous exception that could wind up costing the city dearly.

While Tiers 2 and 4 of the pension system provide automatic cost-of-living adjustments for retirees of up to 3 percent based on half the increase in the Consumer Price Index, Tier 3 would not grant them to cops and firefighters who retired after 22 years' service. If they stayed for 25 years, however, they would receive COLA tied directly to the CPI increase, although it still couldn't exceed 3 percent. That would mean that in a year when the CPI rose by 4 percent, while other retirees got a 2-percent COLA, cops and firefighters would get a 3- percent boost. Because those increases are both automatic and compounded, over the course of their retirements it is possible that their COLAs would eventually come close to doubling the size of their retirement allowances.

One official predicted, however, that even if that occurred, Tier 3 would still be cheaper than Tier 2.

'Offset' Could Hurt

To some extent, the benefits to older retirees would be reduced by a provision unique to Tier 3 that reduces pension payments based on the portion of the Social Security benefits they earned in city service.

Tier 3 would eliminate the Increased Take-Home Pay benefit under which the city currently pays 5 percent of the pension contributions mandated for cops and firefighters under Tier 2. Depending on the age at which they were hired, once the ITHP provision is figured in, those employees currently contribute between onehalf percent and 2.85 percent of salary to their pensions; under Tier 3 all of them would pay the same 3 percent.

Tony Garvey, Executive Director of the Police Pension Fund and a former president of the Lieutenants Benevolent Association, also noted that under Tier 3 cops and firefighters would no longer be able to borrow against their pensions, something many of them do for matters ranging from buying a house to family emergencies. The Police Pension Fund receives about 8,000 loan applications annually, he said, and "I've always considered it a lifeline for police officers who have an immediate need for money."

Differ on UFT Deal's Impact

While he said last week's Tier 5 deal between the Bloomberg administration and the United Federation of Teachers would "create some degree of pressure" for the police and fire unions to come to terms, Mr. Matarazzo insisted, "I don't think it affects us one way or another."

But the former PBA president bristled at the implication behind the legislation that cops and firefighters were treated too generously, both given economic conditions and in relation to other public-employee unions which are being asked for less-sweeping changes under Tier 5.