New York State lawmakers are weighing changes to the Tier 6 pension system with significant long-term fiscal consequences. The debate reflects a familiar pattern in Albany: expand pension commitments now and pay later.
The politics are not hard to grasp. Public sector unions are among the best organized and politically engaged forces in Albany. They show up — literally. On March 8, more than 15,000 members from the UFT, NYSUT, PEF, AFT and other unions rallied at the Capitol for more generous pensions. Gov. Hochul, Assembly Speaker Carl Heastie, Senate Majority Leader Andrea Stewart-Cousins, Comptroller Tom DiNapoli, and Attorney General Tish James have all expressed support. Republican lawmakers are on board too. The only opposition comes from a handful of budget watchdog organizations.
Near-universal agreement to expand benefits should invite skepticism rather than confidence. It is a signature feature of pension politics: when the political reward for pleasing unions is high and the cost is deferred, partisan divisions dissolve.
The main union proposal would reduce employee contributions, lower the retirement age from 63 to 55, and cost $1.5 billion annually. More generous pensions today means larger liabilities tomorrow — and potentially higher taxes to pay for them.
A second feature of pension politics dismisses these tradeoffs: policymakers’ faith in optimistic market assumptions. This is one of the stranger ironies — liberal politicians, often skeptical of market forces, become true believers in rosy stock market projections that will render new commitments affordable. The market, they assure, will abide.
The historical record suggests otherwise. In the 1990s, the Legislature repeatedly expanded pension benefits in a bipartisan fashion — Republicans controlled the Senate for the entire decade and the governorship from 1995 under George Pataki. Then the dot-com bubble burst. The commitments, locked in at peak optimism, remained. Between 2000 and 2010, combined annual employer contributions increased tenfold — from $1 billion to $10 billion — leaving governments scrambling.
In the wake of the Great Recession, Albany did something unusual: imposed restraint. Govs. David Paterson and Andrew Cuomo, aided by Mayor Mike Bloomberg, enacted successive reforms culminating in Tier 6 in 2012. When Cuomo signed the legislation, he projected $80 billion in savings over 30 years.
According to the Empire Center, Tier 5 and Tier 6 together now save state and local governments outside New York City more than $1 billion annually, reducing employer contributions by roughly 15% compared to previous tiers — savings reflected in school budgets that were not cut, property tax increases that did not happen, and municipal services that were preserved.
Now Albany is poised to reverse some of those gains. Unions argue Tier 6 has made it harder to recruit and retain public employees. But this rests on assertion rather than evidence — academic research shows that public workers value salaries, health care, and job security over pensions. The proposed remedy is also enormously expensive and delivers a windfall to current workers, not just new recruits.
Expanding pension generosity will force painful trade-offs — between school funding, social welfare, public safety, and pension obligations. Richer pensions for middle-class public workers mean leaner services for the poor and higher taxes for everyone else.
Will elected officials respond with budget discipline or do what pension politics typically rewards: spend now, and let someone else pay later.
DiSalvo is professor and associate dean of the School of Civic Life and Leadership at the University of North Carolina at Chapel Hill and a senior fellow at the Manhattan Institute.