New York AG expands pension padding investigation

Nick Rees Apr. 1, 2010, 4:00pm

Andrew Cuomo (D)

ALBANY, N.Y. (Legal Newsline) - New York Attorney General Andrew Cuomo's investigation into salary and overtime payments that led to inflated pensions at the expense of taxpayers has been expanded to include an additional two dozen localities across the state.

Inflated salaries compound the effects on a pension as they increase the ultimate, repeated payouts over the pension's term. If a public employee with 20 years of service and an expected 20 year payout gets an average salary inflation of $50,000 in overtime of the final years of employment, the adjusted pension could cost as much as an additional $500,000 to taxpayers.

If one percent of pension costs in New York state were improperly inflated in 2009, eliminating those practices could save taxpayers as much as $500 million over 20 years.

Cuomo's investigation into "pension padding" or "pension spiking," as the practice is called, began in March. His newest expansion to the investigation includes letters sent to 25 entities that have some of the highest proportions of pension costs statewide. The letters seek payroll and related data for pension recipients from localities in western New York, Rochester and the surrounding areas, central New York, the Southern Tier and the Capital Region.

"As the state and nation are gripped by the current economic crisis, we must make sure that taxpayers are not saddled with any artificially inflated bills," Cuomo said. "My office will continue our efforts to ensure that our pension system, which controls $130 billion and serves more than 1 million people across the state, is efficient and waste-free."

New York had an overall pension cost of $486 per resident in 2007, the highest in the nation, according to recent census data. The New York State Common Retirement Fund, which funds the Police & Fire Retirement System and the Employees' Retirement System, holds assets of approximately $130 billion and covers more than one million members and retirees for more than 3,000 government employers. Taxpayers primarily fund the CRF, paying an estimated $2.5 billion to the fund each year.

Pension payments to retirees in the ERS and PFRS have increase from $3.5 billion in 1999 to over $7.3 billion in 2009. Starting in 2011, state and local employers will be required to make significantly higher contributions to fund the state pension system. Mandated contributions for the ERS are expected to increase from 7.4 percent of payroll to 11.9 percent of payroll. For those participating in PFRS, the costs will rise from 15.1 percent to 18.2 percent.

The average annual New York state public pension is approximately $25,000, though some individual retirees earn as much as $300,000 per year. Some retirees receive more in pension than they received in salary.

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New York Attorney General
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