Monday, March 7, 2011

Are Employees In Public Unions Overpaid? Even The NYT Thinks So

When even the liberal bastion of the East, the NY Times, writes that the NY public unions are bankrupting the state, it leaves nowhere for the unions to run. Perhaps, with the steady decline in readership that the Times has suffered, they have come to realize there is a vast untapped readership base across the Hudson and that maybe they had forgotten what true journalism is. Both sides of an issue need to be heard for our country to survive. This may be the first baby step toward reality for the NYT.

At a time when public school students are being forced into ever more crowded classrooms, and poor families will lose state medical benefits, New York State is paying 10 times more for state employees’ pensions than it did just a decade ago.

That huge increase is largely because of Albany’s outsized generosity to the state’s powerful employees’ unions in the early years of the last decade, made worse when the recession pushed down pension fund earnings, forcing the state to make up the difference.

Although taxpayers are on the hook for the recession’s costs, most state employees pay only 3 percent of their salaries to their pensions, half the level of most state employees elsewhere. Their health insurance payments are about half those in the private sector.

In all, the salaries and benefits of state employees add up to $18.5 billion, or a fifth of New York’s operating budget. Unless those costs are reined in, New York will find itself unable to provide even essential services.

Last April, in the midst of one of the worst financial crises that New York and the nation have ever faced, the state’s unionized workers got a 4 percent pay raise that cost $400 million. It came on top of 3 percent raises in each of the previous three years. These raises were negotiated long before the recession began, by a Legislature that routinely gave in to unions that remain among the biggest political contributors in Albany.

During the same period, many private-sector workers had their pay or hours cut. Private-sector wages in New York dropped nearly 9 percent in 2008. In 2009, Gov. David Paterson pleaded with the unions to give up the raises to help the state out of its crisis. Union leaders attacked him in corrosive television ads, and Mr. Paterson eventually caved, settling for an agreement that reduced pension payments to new employees.

In 2000, employee pensions cost New York State taxpayers $100 million. They now cost $1.5 billion, and will be more than $2 billion in 2014. Wall Street’s troubles are a big part of that. But so are state politics. The Legislature, ever eager to curry favor with powerful unions, added sweeteners to pensions and allowed employees to stop making contributions after 10 years.

In 2009, Albany began to recognize the deep hole it had dug. Under the state Constitution, a worker’s pension benefits cannot be cut back once granted. So under the agreement Mr. Paterson reached with the unions, a more rigorous tier was created for nonuniformed employees hired after 2009. It raised their retirement age from 55 to 62, required pension contributions every year instead of just the first 10, and capped the amount of overtime that is calculated in pension benefits.

The deal did not go far enough. New employees can still retire with full benefits at 62, while most American workers must wait until 65. They can still drive up pension payments by earning overtime in their final years, up to a $15,000 cap. And most important, they have to contribute only 3 percent of their pay to their pension; the national norm for public employees is double that.

Read the full NYT Opinion page here.

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