US - Tax payer contributions to New York State public pensions will "explode" in the next five years, forcing the state to divert resources from other services to meet the obligation, a new study has warned.
A report by the Empire Centre for New York State Policy said over the next five years, tax-funded annual contributions to the New York State Teachers' Retirement System (NYSTRS) will more than quadruple, rising from about $900m to $4.5bn, while contributions to the New York State and Local Retirement System (NYSLRS) will more than double, adding $4bn to annual taxpayer costs.
New York City's budgeted pension costs, which have already increased tenfold - or $5.8bn - in the past decade, will rise by at least 20% more ($1.4bn) in the next three years, according to the city's financial plan projections.
The report said pension costs would be even higher if New York's state and local retirement funds were not calculating pension contributions based on permissive government ac-counting standards, which allow them to understate their true liabilities.
While New York's two state pension systems are officially deemed "fully funded," it estimates that NYSLRS is $71bn short of what it will need to fund its pension obligations, and that NYSTRS has a funding shortfall of $49bn, based on valuation standards applied to corporate pension funds.
The report concluded reform was essential and recommended defined benefit schemes be closed to new members "once and for all".
"The lesson is clear: the traditional pension system exposes taxpayers to intolerable levels of financial risk and volatility. New York's existing defined-benefit (DB) public pension plans need to be closed to new members, once and for all.
"They should be replaced either by defined-contribution (DC) plans modelled on the 401(k) accounts that most private workers rely for their own retirement, or by "hybrid" plans, combining elements of DB and DC plans, that cap benefits and require employees to share in some of the financial risks of retirement planning.
"This is not just a matter of financial necessity but of basic fairness to current and future taxpayers-the vast majority of whom will never receive anything approaching the costly, guaranteed benefits available to public employees."
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