Monday, February 01, 2010

New York's Pension Time Bomb

Tick. Tick. Tick.
The price of providing state workers with generous pensions and gold-plated health plans could reach a mind-boggling $7.9 billion by 2012 -- a 42 percent increase over the current tab, state budget documents show.

The Paterson administration expects the cost of providing benefits to the average state employee will equal 62 percent of their salary within three years, according to Budget Division estimates.

That's up from 44 percent now and about double typical rates in the private sector.

Today, the average state worker costs taxpayers about $91,724, including $63,750 for wages, plus $27,974 for pensions, health care and other goodies.
Pension Explosion (Dollar)

The average cost of pay and benefits could balloon to $114,000 a year if trends continue through 2012, according to a Post analysis of the data. Perks alone would cost $43,000.
The pension obligations were unsustainable, and future obligations are even worse, even after creating a new pension tier with lower benefits. These obligations are unsustainable in flush times, and at a time when the state is incapable of balancing its budgets, it is even worse.

New York is hardly alone in this, and some states like New Jersey have contemplated withholding funding existing pension obligations to avoid having to raise taxes or cut existing services.

Yet, New York's state workers have a far higher average salary than one would expect, and the pension obligations only add to the costs.

Cutting the size of the state workforce is a start, but reforming the pension system is absolutely crucial to fixing the long term structural deficits due to the pension obligations.

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