A bill would stop the artificial inflation of public sector pensions with excessive overtime.
By STEVE LEVY | MAY 2, 2019
New Yorkers were shocked by the recent revelation by the Empire Center for Public Policy that Long Island Rail Road Chief Measurement Operator Thomas Caputo received more than $344,000 in overtime payments last year, bringing his total salary to more than $460,000. Equally alarming is that this outlandish number will become the basis upon which his pension payment is calculated, which is expected to exceed $162,000 a year.
New York taxpayers can’t afford to keep paying these outrageously padded pensions, but there is a solution. Assemblyman Michael Fitzpatrick submitted legislation in 2015 that would prohibit overtime payments from being factored into a retiree’s pension calculations.
The bill was prompted by exorbitant pensions becoming more common among police and firefighter retirees over the past several years. Since a person’s pension is based on their highest three years of earning, there is an incentive for prospective retirees to log extraordinary overtime hours in their last years of service. Many municipal contracts require that overtime be granted to employees with the most seniority. There’s basically been a wink and a nod embedded within the system that makes it clear that if you’re about to part ways with the government, it’s your turn to load up on the overtime.
On Long Island, the top scale of Suffolk County detectives now make an average of over $225,000 a year when overtime is included. It is fairly common to see pensions of over $100,000 per year.
Even less lavishly paid civil servants can draw inflated pensions, starting from the day in their 40s that they retire. New York City firefighters earn far less in base salary than a Suffolk cop does, but the rigged overtime system still has helped create conditions where the average retiring firefighter dating back to 2014 received a pension exceeding six figures. These public sector pensions are exempt from state and local income taxes.
Ask a state legislator or the governor what they’re going to do about it and they’ll probably respond that they fixed the problem. They are referring to Tier 6 of the state salary system that was implemented under then-Gov. David Paterson. Indeed, the lawmakers did put a cap on how much overtime could be factored into future pensions, but the keyword is “future.” The provision only applied to employees hired after 2012, meaning two-thirds of current public employees are not covered by this reform. Thus, it will take us a couple of decades at minimum before we start experiencing even the slightest savings.
In the meantime, we will have to suffer through at least 20 years of getting pillaged by these outrageous pensions that are only going to grow more exorbitant. The system could become unsustainable before the Tier 6 changes kick in.
There must be a push to insist that the limits on the overtime being factored into the pensions be implemented immediately, even upon existing employees.
Legal scholars differ as to whether this can be done without an amendment to the state constitution. New York’s constitution contains wording stating that an individual’s pension shall not be “diminished nor impaired” by actions of the Legislature. Many legal analysts would submit that this pertains to broad aspects of the pension system, such as whether it can continue to be a defined benefit pension, whereby the amount slated for the employee is guaranteed by the state, or if it can be morphed into a defined contribution system, as is the case in most private sector unions, whereby the amounts that flow to the employee will depend on the market and the strength of the fund.
Eliminating overtime or unused sick days from being incorporated into the pension is not fundamental to the pension itself and should not require a constitutional amendment. Fitzpatrick has submitted legislation that, if passed, would impose these limits immediately, thereby saving New York taxpayers a fortune over the next few decades. But, even if it were concluded that a constitutional amendment was required, then why not just do it?
It’s not that hard to amend the constitution: An identical bill must pass both houses of the Legislature in consecutive two-year legislative sessions. So, for example, it could pass this year and again in 2021. And that’s what should happen, because the longer we wait, the closer we get to fiscal armageddon.
Steve Levy is executive director of the Center for Cost Effective Governance. He served as Suffolk County executive, as an Assemblyman and host of “The Steve Levy Radio Show.”