Pension Fund Strength Helps Lower Contribution Rates
DiNapoli: Move Will Reduce Costs for State, Local Government Employers
State Comptroller Thomas P. DiNapoli today announced that employer contribution rates for the Employees’ Retirement System (ERS) and the Police and Fire Retirement System (PFRS) would decrease again in 2010. The strength of the $153.9 billion Common Retirement Fund (Fund) has enabled DiNapoli to lower the average ERS rate to 7.4 percent from 8.5 percent of payroll, while the average employer contribution rate for the PFRS will fall to 15.1 percent from 15.7 percent.
“The Fund continues to be one of the strongest public pension funds in the United States,” DiNapoli said. “Last year, we were able to lower the employer rates, and this year, we’re lowering them even more. The lower rates are good news for state and local governments, and good news for taxpayers. These are difficult economic times, and the savings generated by the lower rates will certainly help.
“But the good news comes with a healthy dose of caution. If the economy continues to drag, we will not be able to avoid rate increases in the future. I’ve got some advice for the state and for local governments: plan carefully for the future.”
DiNapoli estimated this year’s rate reductions will save state and local government taxpayers approximately $300 million combined. The state will save $120 million, while local governments will save a combined $180 million.
New York State Conference of Mayors (NYCOM) Executive Director Peter A. Baynes said: “The reduction in pension rates announced today is much-needed good news for cities and villages. These lower pension rates are a testament to Comptroller DiNapoli’s careful stewardship of the Common Retirement Fund and his sensitivity to the fiscal plight of local governments. Since pension costs are one of the largest components of municipal budgets – and, on average, equal to 20 percent of a city’s property tax levy – these lower rates will help alleviate pressure on the overburdened property tax. However, it is important to note that Comptroller DiNapoli has projected a likely increase in future year pension rates, assuming a continuation of current economic conditions. This warning makes it more imperative that state aid to local governments remains strong.”
G. Jeffrey Haber, executive director of the Association of Towns of the State of New York, said: “In this time of escalating costs and diminishing revenues for the towns and the other local governments of New York, Comptroller DiNapoli brings us good news. On behalf of towns in New York, I congratulate him for his prudent management of the Retirement System.”
DiNapoli noted that the Fund posted a 2.56 percent return for the fiscal year ended March 31, 2008. Contributions from the 3,021 State and local government employers in the fiscal year ended March 31, 2008 totaled nearly $2.7 billion, and contributions from the system’s members totaled roughly $265.7 million. DiNapoli said the system paid out more than $6.8 billion in benefits during that period.
DiNapoli said that letters informing employers of the new rates were mailed Friday, August 29. The letters told the state and local governments: “If the current economic conditions result in continued investment performance below the 8 percent actuarial assumption in FYE 2009, you should be prepared for employer contributions to begin to rise… When doing long-term budget planning, it would be appropriate to assume that contribution rates will be rising.”