City taxpayers will dish out $151 million for Gov. Kathy Hochul and state lawmakers’ sweetheart giveaway to public-sector labor unions – largely undoing pension reforms that slightly reined in runaway spending.
The Democrats in charge of state government agreed to sweeten the already generous pensions of public employees as part of their painfully slow process to pass a budget, in a move that benefits themselves and the influential unions but will cost taxpayers $6 billion more by 2051.
The eye-watering sum also negates a big chunk of the $500 million the Big Apple is projecting to get after the state agreed to give the city a pied-a-terre tax on luxury second homes in the five boroughs.
The pension change affects “Tier 6” public employees, which was created for government employees hired after 2012 – including 74 of the 213 state lawmakers.
“It represents the worst of Albany,” said Ken Girardin, a fellow at the Manhattan Institute. “You have legislators profiting from these changes because they’re Tier 6 members,
“It’s not a bonanza,” he added. “It’s a heist against New York taxpayers and the elected officials are driving the getaway car.”
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Mamdani, the fledgling socialist who took office as mayor in January, had campaigned promising to tax the rich, eventually getting the governor to agree to the tax on second homes as she faces re-election in November.
The city is hoping to generate $500 million from the tax, but city Comptroller Mark Levine had estimated it could be far less — under $400 million. The rollback of Tier 6 will gobble up a chunk of any new gains from the tax-the-rich crusade.
The massive spending bill that state lawmakers were set to push through on Tuesday showed the city retirement systems will pay at least $151.1 million to cover pension costs in fiscal year 2027, rising to $221.8 million in 2024 and $389.7 million by 2051 — a cumulative increase of more than $6 billion for city taxpayers.
The hit on Mamdani’s city government budget totals $121 million, while there is another $30 million for workers in NYC Transit, Health + Hospitals and the New York City Housing Authority.
This pension windfall allows teachers and other educators to retire at age 58 with 30 years of service, up from 63 — a big victory for the teachers’ union that lobbied for the change.
The United Federation of Teachers boasted that the rollback saves members $45,000 in pension payments by retiring five years early.
Teachers with an average pension of $85,000 a year will now collect an additional $425,000 by retiring at age 58 instead of 63.
“Albany heard us and took a major step in correcting the injustice of Tier 6,” gushed UFT president Michael Mulgrew.
“Lowering the retirement age for educators from 63 to 58 after 30 years of service will make the pensions better and fairer for current and future employees,” he added. “It shows that progress is possible when we stand together.”
Government workers in Tier 6 essentially get a raise by contributing less toward their pensions and shifting more costs to local governments and taxpayers.
Workers making between $55,000 and $75,000, will now contribute 3% of their compensation toward their pension instead of 4.5%.
The contribution will drop from 5.75% to 4% for workers making between $75,000 to $100,000 and from 6% to 5.25% for those making between $100,000 and $1250,000, and from 6% to 5.75% for those making over $125,000.
The cap on overtime earnings that can count toward the final pension benefit also increases to $30,000, up from $24,000 for Tier 5 members and $22,000 for Tier 6 members.
Other language in the state bill would increase the overtime that can count toward pensionable wages for state and local Fire Departments from 15% to 25%.
Gov. Andrew Cuomo and the legislature pushed Tier 6 in 2012 to curb ballooning pension costs after it increased tenfold between 2000 and 2010.
“This is not just an election year giveaway,” Girardin said. “These are permanent, recurring costs imposed on taxpayers.”
Even Democrats privately agree the pension porkapalooza — coupled with the controversial pied-a-terre tax — is an embarrassment for Hochul and Democratic lawmakers.
“We effectively just jacked up taxes to provide a platinum-plated parachute for unions—not to plug some hole in the budget to provide basic services to regular New Yorkers,” one Democratic source seethed.
