Politics on the Hudson

Pension costs for state and local governments will soar by 37 percent in 2012 as the state’s $124.8 billion pension fund grapples with a sluggish economy, Comptroller Thomas DiNapoli announced today.

The contribution rates to fund the state’s Employee Retirement System are surging from 11.9 percent of a municipality’s total salary to 16.3 percent in 2012. The average contribution for the Police and Fire Retirement System is increasing from 18.2 percent to 21.6 percent, an 18.6 percent jump.

DiNapoli, a Democrat running for election in November, blamed the poor economy on the need to boost pension contributions. Local governments have been bracing for higher costs over the next few years, which will force them to either raise taxes or cut services to pay the higher premiums.

“Unfortunately, it takes the economy a lot longer to climb out of a hole than it takes to fall in it,” DiNapoli said. “The markets are still recovering from the 2008-09 financial meltdown, and that recovery continues to be volatile.”

DiNapoli announced the pension fund’s value for the quarter ending June 30 was $124.8 billion, one of the largest’s pension funds in the country. The fund posted a negative 4.38 percent rate of return for the quarter.

The higher pension rates come even as DiNapoli agreed with the pension system’s actuary to lower the assumed investment rate of return of the pension’s investments to 7.5 percent, down from its longstanding 8 percent return target.

Also, the higher rates come after the state Legislature and Paterson agreed this year to let the state and local governments essentially borrow off the pension fund to limit the big spikes in pension costs over the next 10 years.

The move has been criticized by fiscal conservatives and DiNapoli’s Republican challenger Harry Wilson, who have argued that the move will lead to higher pension costs down the road.

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