(Bloomberg) -- New York and its local governments outside New York City will pay $900 million more into the state’s pension fund in the coming fiscal year after benefit sweeteners were approved by state lawmakers and public employee salaries rose.
Municipalities’ pension-contribution rates will increase to 16.5% of payroll from 15.2% for civil employees for the the fiscal year beginning April 1 and to 33.7% of payroll from 31.2% for police officers and firefighters, state Comptroller Tom DiNapoli said Tuesday.
The payments into the system are rising after lawmakers reversed a 2012 pension reform pushed through by former Governor Andrew Cuomo. Significant salary growth for active members, rising life expectancy and lagging investment performance in 2022 are also pushing up the bills, according to an actuarial report approved by DiNapoli.
Under legislation passed as part of the state budget this year, pension benefits for so-called Tier 6 employees will be calculated based on the average of the final three years of employment. Because of raises, that’s more costly than the five-year method adopted by the state in 2012 after the financial crisis opened up yawning deficits in the pension system.
The changes retroactively increased pension payouts to public employees who started working more than a decade ago and boosts benefits for not-yet hired employees.
The shift also apply to New York City, adding $165 million in pension benefit costs in the current fiscal year, according to the city comptroller. New York City’s five public employee pension funds are separate from the state.
The pension costs also reflect the toll of the stock market downturn two years ago, which caused New York state’s pension to fall far short of its 5.9% assumed rate of investment return in fiscal year April 1, 2022 to March 31, 2023. While the investments rebounded, it wasn’t enough to offset the prior years loss.
New York’s pension was 93.2% funded as of March 31, 2024.
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