Oswego State students seeking teaching or state jobs after graduation could become part of the pension plan’s Tier VI, which would exclude bonuses from the pension formula.
Lt. Gov. Duffy arrived in City Hall to announce how the mandate relief plan, which includes an additional tier and the state’s eventual takeover of all Medicaid growth costs, would impact Oswego on Feb. 3.
The state is estimating that the pension reform will save Oswego County $410 million over the next 30 years.
“For too long cities like Oswego have been struggling under mounting pension costs, but Gov. Cuomo’s Tier VI proposal, which will save Oswego County $410 million over the next 30 years, will help alleviate the burden for decades to come,” Oswego Mayor Tom Gillen said.
The proposed tier probably would not create savings for years, until the new hires begin to retire, because the changes would impact how much is paid out for retirement.
There are three components that create the pension formula, which decides how much a retiree will receive. The first is the number of years an employee has in service multiplied by the last three year’s average final salary, which is finally multiplied by 2 percent.
Often employees try and increase their pension by taking on additional work during their last three years. In uniformed services, there are a lot of available hours to work overtime. Many times that is given to police officers or firefighters (uniformed services) who will be retiring in the next three years, which will increase their salary totals.
“[In uniformed services there] is always overtime, someone is sick, someone gets hurt,” economics professor Larry Spizman said. “You need someone to cover the shifts. They give that overtime to officers getting ready to retire. That overtime, which is time-and-a-half, sometimes double time, goes onto the final average salary over the last three years.”
Teachers often will do something similar, Spizman said. Sometimes a teacher will coach several sports or advise clubs to increase their salary during their last few years.
“Is it gaming the system? Sure. Is it illegal? Absolutely not. Is it not right? I don’t know if it’s not right. You know, it’s set up for that. That’s what they are trying to eliminate,” Spizman said.
The proposed sixth tier would average the last five years, which would probably decrease the average final salary. They will also take into consideration only the base salary, without bonuses, to count toward the pension formula.
“This Tier VI has no mention of firemen or policemen, because they are always excluded,” Spizman said about the bonuses and overtime.
Another proposed revision in Tier Six is that the two percent multiplier would be reduced to 1.67 percent, Spizman said.
“I’m going to be very blunt, for those who want to protect its legacy going forward, the taxpayers in the state can’t afford to keep these same costs going,” Duffy said. “People that apply for jobs if this has passed, have the choice if those benefits don’t fit, they can go elsewhere. But they know going in what the system is, and I think that’s the most important thing.”
Part of the mandate relief will come in the government takeover of Medicaid growth. Local municipalities will continue paying what they currently are, but any additional growth will eventually be entirely covered by New York state.
Currently, the state pays all growth over three percent of Medicaid, a release from the governor’s office said. In 2013, the county cap will be reduced to two percent; in 2014 the cap will be reduced to one percent and in 2015 the state will cover 100 percent of Medicaid growth.
The money to pay for the growth will still have to come from somewhere.
“Politically it takes the pressure off the local governments,” Spizman said. “But now the state is going to pay those increases, but where is the state going to get the money from? It’s going to be us still.”
The year five total savings for Oswego County is $3,925,828 from the state taking over Medicaid growth.
“I would take the savings with a grain of salt,” Spizman said. “We don’t know what assumptions they made to calculate the savings and were they realistic assumptions about growth rates and things of that nature.”
Duffy said that the goal is to release the pressure of state mandates on local governments which tend to drive up local taxes.
“These are the first two steps by taking over Medicaid growth and pension reform that will put us on the path and build success one step at a time,” Duffy said.