New York Pensions: Making Things More Expensive in Latest State Budget
No, paying for benefits later and letting people retire earlier aren't "reforms"
Thanks. I hate it.
To make it clear, two things have occurred in this New York State budget passage:
Tier 6 state pensions — reduction of retirement age to 58 for teachers under certain conditions (which many will be able to meet)
NYC borrowing from the city pensions in the form of pushing off contributions to later years
I hate both of these things, the first which immediately increases the costs of NY State pensions, and the second of which increases NYC’s leverage, and therefore its credit risk.
Now jumping to news coverage and editorial remarks:
28 May 2026, NY Post: New York’s long-delayed $269B budget finally passes Legislature
They finally did it.
New York lawmakers approved a monster $269 billion budget — that’s both the largest in state history and one of the latest.
The spending plan, passed late Wednesday, adds a new pied-à-terre tax on luxury second homes in New York City, rolls back costly state climate mandates and delivers several other controversial election-year asks by Gov. Kathy Hochul that led to a protracted two-month fight in Albany.
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The budget also will:
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Give a $557 million sweetheart pension giveaway to public-sector unions that lowers teachers’ retirement ages to 58, from 63.
28 May 2026, NY Post Editorial: Hochul just let Mamdani start to borrow NYC’s way back to the 1975 financial crisis
Across various social media platforms, high-fiving lefties and progressives are praising Mayor Zohran Mamdani for balancing the city budget without harming poor and working-class New Yorkers — when all he’s done is guarantee harm after he’s conveniently left office.
The biggest piece of the state’s “bailout” is just a license to spend now and pay later.
Specifically, Gov. Kathy Hochul’s OK to defer billions in payments to city pension funds, which amounts to just borrowing the cash.
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Two, as Hammond points out, the scheme lets the city skip $16.7 billion in pension payments these next seven years at a cost of $24.3 billion over the following five — a truly brutal bill when it hits.
28 May 2026, NY Post, Ken Girardin op-ed: Progressives cheer as Mamdani robs the future to waste money in the present
The socialists have been swooning ever since Mayor Zohran Mamdani announced he had managed to balance New York City’s $125 billion budget.
Sen. Bernie Sanders (I-Vt.) acclaimed the new mayor for confronting “a huge budget deficit” and bringing it “down to zero,” while still boosting spending.
“This Man is a LEGEND,” gushed Mamdani superfan Ryan Rozbiani on X.
“Something that nobody else could do,” marveled lefty influencer Suzie Rizzio.
Funny how these progressives don’t acknowledge how Mamdani is doing it: by burdening future taxpayers with pension costs he’s refusing to pay now. So much for being the party of the working man.
Sanders isn’t a New Yorker, and more to the point, and to be nastier, Sanders won’t be alive to pay the bill when it comes due. What does Bernie care.
I assume Mamdani will have moved to yet another place by the time the bill comes due, or his family tax lawyers will have figured out a way to make sure the trusts don’t have to pay any taxes to support the pension costs. Somebody else will pay. Those other “rich” people will pay.
Or perhaps the public employee union members will have to pay for their own pensions, because those will be the rich people who are left after the other rich people have left.
28 May 2026, NY Post: Hochul and Dems’ NY pension, $557M porkapalooza came after union donated millions to campaigns
They’re pensioning off New York’s future.
Powerful public-sector unions scored their $557 million sweetheart pension giveaway after an election-year pressure campaign aimed at Gov. Kathy Hochul and Albany lawmakers that cashed in on labor’s long support for statewide Democrats.
The ultimate deal unveiled this week was directly negotiated with Hochul by AFL-CIO President Mario Cilento, whom a coalition of unions entrusted to accomplish their decade-old goal of rolling back pension reforms that had raised recently hired teachers’ retirement ages.
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The pension porkapalooza centered around the state’s Tier 6 employees, a category established by former Gov. Andrew Cuomo in 2012 to help contain runaway retirement costs.
To the unions’ everlasting chagrin, Cuomo and lawmakers raised the retirement age in Tier 6 to 63 and set higher employee contributions.
Roughly 800,000 public employees are currently in Tier 6. It now represents 66% of workers under the state’s primary retirement system.
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Under the finalized deal, Tier 6 teachers will be able to retire penalty-free at age 58 after 30 years of service, rather than the current 63.
The teachers’ union gives — and then it gets, records show.
The New York State United Teachers, which counts the UFT as an affiliate, has donated $18.7 million to candidates, mostly state lawmakers, going back to 1999, according to the records.
The UFT has donated another $4.2 million.
I hope that “investment” is worth it to the unions, because I think they will ultimately find there will be other consequences to making their pensions more expensive.
Equal Time: Other Coverage
Before I get back to excoriating these pension-related “budgetmaking” decisions, let me give others some time:
NYSUT, 28 May 2026: Fix Tier 6 efforts yield significant reforms in state budget
This year’s state budget includes welcome news for all Fix Tier 6 advocates: Thanks to member solidarity, we secured meaningful pension reforms for Tier 6 members in multiple retirement systems.
According to budget details released Friday, Tier 6 updates vary by member group. For Tier 6 members in NYSTRS and NYCTRS, a group that includes most teachers and teaching assistants, the retirement age will be reduced by five years, from 63 to 58, for members with 30 years of service, without penalties.
For Tier 6 members in NYSERS, NYCERS and NYCBERS — which doesn’t include teachers but covers many school-related professionals, support staff and other workers — contribution rates will be reduced across most salary bands. According to the new contribution bands, new NYSERS/NYCERS/NYCBERS members who earn $75,000 or less will pay 3 percent; $75,000 to $100,000, 4 percent; $100,000-$125,000, 5.25 percent, and the rate will be 5.75 percent for members who earn $125,000 or more.
“This Tier 6 agreement is proof that when workers organize and stay united, change is possible. This is a victory for public workers across New York,” said NYSUT President Melinda Person. “Because members across New York refused to give up, we secured meaningful progress for public workers — including lowering the retirement age from 63 to 58 after 30 years of service for members in the NYS and NYC Teachers’ Retirement Systems and reducing contribution rates for many other public employees.”
It’s basically a press release from the NY State teacher’s union, so there’s a variety of quotes from teachers, etc. I will select one quote:
Reducing retirement age is critical because this profession takes a toll, Liquori continued. Educators carry unique physical, emotional, and professional demands, and those pressures can hurt their longevity and negatively impact student outcomes. “Each year, teaching gets a little bit harder. Teachers are being asked to do more every year, and burnout is real,” said Liquori. “This is going to be life-changing for so many.”
28 May 2026, Jacobin: Kathy Hochul’s New Budget Fails to Meet the Moment
The New York State budget negotiations drew to an anti-climactic close this week. This was not only the longest budget negotiation in the last sixteen years but also one of the most nonsensical.
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There were a couple silver linings to this year’s budget.
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Additionally, public employees in the state won significant reforms to their retirement benefits. Teachers and teaching assistants across the state will see their retirement age lowered from sixty-three to fifty-eight after thirty years of service. Nonteacher civil servants will see their contribution rates lowered and benefit calculations improved. These are real material wins for New Yorkers. But their victory is bittersweet alongside the rest of the budget that so thoroughly failed to meet the moment.
If you are unaware, Jacobin is a socialist publication.
27 May 2026, Gothamist: New York lawmakers finally pass $268.5B budget. Here’s what made the cut
New York lawmakers finally finished passing a state budget Wednesday night that softens the state’s climate change goals, limits local police from cooperating with federal immigration authorities and sprinkles cash across the state to cities struggling with their own financial woes.
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“ Kathy Hochul’s the leader of the Democratic Party,” he said. “Her party has a majority in the Senate and the Assembly, and she can’t get a budget passed. That shows a terrible lack of leadership on her part.”
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Along with Hochul, New York City Mayor Zohran Mamdani was also able to claim major wins.
He leaned on Hochul and state legislators to help him close a $5.4 billion city budget deficit, which they did in part by providing more than $1.5 billion in additional funding and allowing the city to defer its payments to the pension system — a move decried by some budget watchdogs.
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Public-sector unions also won big. After a monthslong campaign, lawmakers approved $551 million of improvements to retirement benefits for workers hired after 2012.
Assemblymember Michael Fitzpatrick, a Suffolk County Republican, voted against those changes. But he said the measure’s success reflected the influence of labor groups – particularly in an election year.
“We all understand politics,” Fitzpatrick said. “The unions, number one, they’re a business.”
New York State AFL-CIO President Mario Cilento, who helped negotiate with Hochul on the pension deal, took a victory lap.
“This demonstrates what the union movement can achieve when we stand together and raise our voices to improve the quality of life for all working people,” he said.
28 May 2026, NY Times: ICE Restrictions, a New Tax: What’s in New York’s $269 Billion Budget
Gov. Kathy Hochul used the state budget as a vehicle for policy initiatives, including a new second-home tax and a push to make the state less hospitable to immigration agents.
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Here are six key things to know about the budget, and why it’s about a lot more than money.
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Teachers, police and firefighters benefit
In 2012, when Andrew M. Cuomo was governor, he negotiated a deal to reduce pension benefits for teachers, the police and firefighters that he said would save the state $80 billion over the next three decades.
The state created a sixth tier for newly hired teachers and other public employees, who would receive less generous retirement benefits than their longer-tenured colleagues.
Ever since, labor unions have been pushing Albany to ‘’fix Tier 6’‘ by improving its benefits, which they say would help recruiting and talent retention. Albany relented this year.
The president of the state teachers’ union, Melinda Person, praised the agreement, which will improve benefits and allow teachers to retire at 58 rather than 63.
‘’This Tier 6 agreement is proof that when workers organize and stay united, change is possible. This is a victory for public workers across New York,’‘ she said.
But many lawmakers expressed concern about the roughly $550 million yearly cost to state and local governments.
‘’The mother of all pension sweeteners will leave a sour taste in the mouth of taxpayers,’‘ Assemblyman Michael Fitzpatrick, a Republican representing Suffolk County, said, suggesting that the change was a giveaway to the labor interests that supported lawmakers.
‘’We’ll vote against the taxpayers’ interest before we vote against our own,’‘ he said, with a sigh.
Taxing the rich and bailing out Mamdani
The governor was adamantly opposed to raising taxes. But New York City faced a multibillion-dollar budget gap, and its new mayor, Zohran Mamdani, repeatedly appealed to Albany for help -- preferably by taxing the rich.
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Mr. Mamdani also won state approval to delay existing pension payments -- a short-term play that will eventually cost the city billions of dollars over the next decade.
Okay, enough time for other people.
The Core Problem: Bad Government Fiscal Practice
The big sin of public finance is the Wimpy Principle: I would gladly pay you Tuesday for a hamburger today. It’s that they put non-capital goods and services on the government credit card, and then “finance” this spending over an absurd horizon.
[If you are not familiar, Wimpy is a character from the Popeye comics, who has the above notorious catchphrase, and no, he does not make good his promise. Nobody trusts him to pay.]
The problem with U.S. government accounting and fiscal practice is that there are no real standards. One shouldn’t be amortizing pension debt, for example, beyond the deaths of the current average ACTIVE EMPLOYEE… and that’s me being extreme about certain pension plans’ amortization horizons. Good practice is to retire the debt by the time the employees have retired.
Sure, sure, there’s GASB, but it is tough to impose standards on governments when politicians want to evade the rules so that they can spend money at levels that are unsustainable. If they can play tricks to have their favored policies, the politicians will do it.
Such as Mamdani shortchanging pensions to fund current programs he prefers.
After all, the pension benefits will always get paid! We don’t have to reflect the accrued cost of pensions in government budgets… hahaha government budgets are just playing with numbers! None of it is real!
Until, all of a sudden, it is real, and you find out why the accrued cost should have been used for the basis of the accounting (and why non-governmental entities do not get to use cash accounting when it comes to pensions and other long-term liabilities.
Remember when the Chicago Firefighters fund had a liquidity squeeze, and needed a short-term loan just to cover cash benefits going out? I should hope so - that was not many months ago:
I wouldn’t be surprised if it happens again. They just made the situation worse with pension sweeteners.
But that’s Chicago. That’s one end state, after decades of undercontributions.
NYC is just looking at the start of that trajectory.
Pension Sweeteners Take Many Forms: Early Retirement Ages
It will be interesting to see how the costs of the earlier retirement ages for Tier 6 will get factored in. There has been an estimate, and I want you to see this:
28 May 2026, City and State: “Significant progress” made with Tier 6 reforms in state budget
In a Q&A, United Federation of Teachers President Michael Mulgrew talks about the new, lower retirement age for educators.
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In terms of costs, original estimates were around $1.5 billion and the final budget plan was estimated at $577 million. Do you think those are accurate and was this a good compromise between reform and costs?
Of course, I never believe any estimated costs out of Albany, or New York City, or any government-based entity. I’m sorry, I’ve just been doing this for too long. You have this position known as an actuary, right? Their job is very simple. Once the tier is created, they want to make sure they get all the revenue that the tier is supposed to create for them, all the payments of local government, state government, city government. When they’re estimating the costs, if you ask them, “Is the money necessary?” They’ll just tell you: “That’s irrelevant. Our job is to calculate what we’re supposed to get, and it doesn’t matter if we need it or not.” That’s the problem, because we have to look at that side of the equation right now.
I can be even more dismissive of your position, Mulgrew, but congrats on getting the result you wanted.
(wah wah wah, but we wanted age 55 for early retirement wah wah wah, we have it so harrrrrrd)
For all the “Won’t anyone think of the poor teachers” press releases put out by teachers’ unions in NY, as I’ve written multiple times, teachers are the longest-lived of government employees, and the most numerous in category.
Dropping a full retirement age to 58 is absurd for these groups, so the five extra years of full retirement benefits will boost the pension costs — I approximate this about $0.6 billion to be about 30% increase but… I’m actually skeptical about the actuarial projections, too, Mulgrew.
But perhaps not for the reasons Mulgrew thinks.
I went to the page for the NY State Teachers fund in the Public Plans Database.
The active-to-beneficiary ratio for NY State Teachers fund is actually relatively high (blue line), compared to other teachers’ funds (red line), but that may have been maintained high because of that higher retirement age… let’s watch that ratio plummet!
Now, let’s look at what the contributions look like from history:
Again, the NY State Teachers fund looks pretty good compared to its peers: the contribution rate is a relatively low percentage of the payroll, and the yellow line (the national average) just goes up up up.
A mere 30% increase would be an increase from 10% of payroll up to 13% of payroll.
However.
That may not be how things turn out.
Actuarial estimates are based on all sorts of assumptions — they would have needed to incorporate assumptions about retirement percentages, future contributions, and more. If the experience is adverse, and I wouldn’t be surprised if it were, the costs could be worse.
This should be interesting to see, and obviously, as a NY taxpayer, I will have to absorb this cost. (whee)
Should be “fun” finding out!
And just in time for a demographic crunch among the K-12 population! There’s no guarantee that the teacher numbers will stay elevated as the school-aged population drops… MMM.
Earlier retirement ages, higher benefit formulas, and all sorts of pension sweeteners make the benefits more expensive and ultimately make the systems more fragile.
Related Links
13 May 2026: New York City Pension Watch: Balancing the Budget by Shorting the Pensions
6 May 2026: New York City & State Pension Watch: No, Don’t Play With the Assets
29 Apr 2026: New York City Pension Watch: Hey, What if We “Delay” the Contributions?
10 Mar 2026: New York Pension Watch: Public Employee Unions Ask for Pension Sweeteners!
29 Jan 2026: New York City Watch: Fiscal Emergency?
7 Jan 2026: A Tale of Two Mayors: Chicago vs. New York
26 Sep 2025: Chicago Pensions: The $11 Billion Sweetener, POBs, and the Road to Insolvency
7 Sep 2023: Happy Back to School Time! State of U.S. Teachers Pensions 2023
The devil is in the details. Thanks Mary Pat.