End pension padding via OT
Ballooning overtime in the public sector remains a concern in New York state, as side-by-side stories in Wednesday’s Gazette illustrated.
One dealt with the biggest increase in overtime spending by the state in five years; the other addressed skyrocketing pension payments (which in many cases are overtime-related, though not in the case of teachers, who were the subject of the story).
Like most employers, the state has reduced its workforce since the recession began in 2009. On occasion, that has necessitated the use of overtime by the remaining workforce, which can be cheaper than hiring a slew of new workers — at least initially.
But what can happen when overtime isn’t kept in check was illustrated to some degree by the second story, which addressed rising pension obligations on local school budgets. Teachers generally don’t even earn overtime, but school districts’ payments to their pension system will rise to an equivalent of 16 percent of teachers’ salaries this year. As a result, the state’s cap on school tax hikes will average 4.6 percent, more than double the 2 percent allowed without pension costs factored in.
And pension costs borne by governments where overtime is more common will be much higher — equal to roughly 21 percent of non-uniformed personnel’s salaries and 29 percent of police and firefighters’.
So overtime — which costs time-and-and-a-half or more when paid — hurts even more later, when it boosts pension payments for 10, 20 and 30 years after the worker retires.
Gov. Andrew Cuomo’s last go-round with pension reform (Tier VI, passed last year) did address the use of overtime in pension calculation for future retirees, but only for those workers hired after the change was made). So it’s going to be a long time before the impact from this change is going to be felt.
That means the state and municipal governments have to continue to monitor their overtime budgets carefully. And the state must find a way to keep current workers from milking overtime to pad their pensions.