ALBANY -- State lawmakers, fearing future municipal bankruptcies, agreed yesterday to a create a sweeping new pension system for most state and local public employees that they estimate would save cash-strapped governments $48 billion over 30 years.
The new Tier 5 system, for workers hired after Jan. 1, 2010, will require most public employees to work 10 full years before vesting in the system, rather than the current five, and limit the amount of overtime that can be used in the calculation of a final average salary to 15 percent of regular annual wages.
The current practice of many civil servants running up their final three years' worth of earnings by 50 percent or more in order to boost their final pensions has contributed significantly to the marked increase in pension costs.
The legislation -- approved by both the Senate and Assembly -- also raises the minimum full-benefit retirement age for members of the State and Local Retirement System to 62 years from the current 55.
But members of the non-New York City state Teachers' Retirement System would be allowed to retire at 57 with 30 years of service.
City teachers and other Department of Education employees also are subject to the new 10-year vesting requirement, but their pension contributions were calculated differently because of longstanding differences between their contracts and those of teachers outside the city.
Workers who retire before the new minimum age could face a loss of benefits of as much as 38 percent under the legislation.
Tier 5, which excludes the system covering city cops and firefighters, was approved in response to a warning from state Comptroller Tom DiNapoli that pension costs for local governments and the state were about to skyrocket by as much as 30 percent over the next two years.
Gov. Paterson called passage of the measure "a critical step" toward getting state and local government spending under control.
Assembly Speaker Sheldon Silver (D-Manhattan) said the measure would "save New York billions of dollars and reduce costs to the taxpayers while maintaining a quality workforce."
However, Manhattan Institute fiscal analyst E.J. McMahon contended that hidden away in the teacher-pension section is "an incredible set of special concessions to unionized schoolteachers."
He called the overall legislation "nothing significant," noting, "This basically is restoring the current Tier 4 system to the same level it was at in the early 1980s.
"It's not the answer to the problems."