Pension abuse
State Attorney General Andrew M. Cuomo has shined the spotlight on an egregious abuse of the state pension system by public employees inflating their salaries with drastic increases in overtime just before they retire.
Pensions are based on the final one to three years of salary, not just base pay. The increased overtime can add thousands of dollars a year to lifelong pensions of retirees who may receive their boosted pensions for decades after retiring as young as 55.
Pension padding is nothing new. However, Attorney General Cuomo has been scrutinizing the practice with an investigation earlier this year of 65 governmental agencies. After analyzing data on 3,688 workers in 50 agencies, Mr. Cuomo found evidence of skyrocketing overtime in 28 of the public employers, whom he did not identify.
Among the more outrageous examples was a deputy commissioner of civil defense/disaster who put in 1,629 hours of overtime in his final three years at work, although he had not worked any overtime previously. The employee earned more than $50,000 in overtime the year before he retired.
A New York Port Authority employee nearly tripled the amount of annual overtime she worked in the last two or three years to almost 1,191 hours a year, or about 24 hours a week, allowing for a couple of weeks vacation. The overtime added $67,000 to her $69,000 base salary in 2008. She retired the next year earning a pension on the overtime.
Workers approaching overtime can monopolize the chance to work extra to the detriment of fellow workers with less seniority. But they are not likely to complain about it when they hope to be doing the same thing as they approach retirement.
Costly pension padding is legal. Employers and pension officials are well aware of it. Attorney General Cuomo did not report any criminal wrongdoing, but he called it a widespread, chronic and expensive problem that New York "can't afford" anymore. He is expanding the investigation to 23 more government employers.
A New York Post report cited census data showing the state has the highest pension costs in the nation at $486 per resident in 2007. Cities, counties and other local governments are struggling to keep up with rising pension costs forcing cutbacks in other areas.
When addressing the problem, employer options are limited by state regulations and employee contracts, but the attorney general recommended steps including capping and monitoring overtime, reducing the need for overtime and moving away from seniority-based systems.
Within the scope of their authority, public employers should take steps to limit the practice, but they best be prepared for some strong resistance from public employee unions.
