Governor’s raise brings “unintended consequence” with it, policy expert says

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A controversial move by the New York State Legislature to raise the salary of the governor may have had an unintended consequence, a public policy expert says.

As they were passing the state budget in the early morning hours of April 1st, lawmakers also voted to raise the salaries of Governor Andrew Cuomo and Lieutenant Governor Kathy Hochul. Cuomo’s salary, which was $179,000 in 2018, will increase on a year-by-year schedule until it reaches $250,000 in 2021. Hochul’s salary will increase to $220,000 by 2021.

The raises were recommended by the New York State Compensation Committee in December 2018. However, they required approval from lawmakers. Still, the vote to give the governor a raise came as a surprise to some of them. There was no word the vote would happen until just before it did.

“It was sprung on us at the very last minute,” noted Phil Steck, a Democratic Albany-area assemblyman who crossed party lines and voted against the raise.

Ken Girardin, a policy analyst for the Empire Center for Public Policy, noted that with the governor’s salary increasing, some public pension costs will be increasing as well.

“This was one of the worst examples of an unintended consequence in state government that I’ve ever seen,” Girardin said.

This affects Tier 6 pension plan members across New York, meaning anyone who joined the pension system after April 1st, 2012. It includes public workers like police officers, teachers, and even some doctors. The Final Average Salary (FAS) of those employees, which is used to calculate annual pension payouts, is capped at the governors salary by state law. With the governor’s salary going up, the cap on FAS goes up with it.

“Back of the envelope, you could be looking at more than $100 million in future pension payments, all because the legislature rushed through this one bill in the middle of the night,” Girardin said.

It’s unclear exactly how much money this move will cost the pension system, since none of the affected workers are able to collect those benefits yet.

“But it’s going to force taxpayers to immediately start putting more money into the pension system,” Girardin noted.

The office of New York State Comptroller Thomas DiNapoli is responsible for administering the New York State and Local Retirement System. They are yet to estimate how the governor’s raise will affect pension payments.

“It will be looked at by the Retirement System’s actuary as part of his fiscal year actuarial valuation, which is finalized by the end of the summer,” said Mark Johnson, a spokesperson for DiNapoli’s office.

Assemblyman Sean Ryan voted to increase the governor’s salary. He says he was aware of the consequences to the pension system when he took that vote.

“This will definitely cost the pension system a little more, but only a little more,” Ryan said. “The difference in the Tier 6 pensions from the previous tiers is the employees in the Tier 6 pensions (contribute to their pensions) through their entire career.”

Members in Tier 3 and Tier 4 of the Employees’ Retirement System, for instance, are only required to contribute to their pensions for their first 10 years of membership in the system. In other words, Tier 6 members contribute more to their pensions, and taxpayers contribute less. Even though he approved the raise, Ryan admitted it could have been handled a lot better by Governor Andrew Cuomo, who asked the legislature to pass the resolution.

“It didn’t come at the best time because it came at a time where there was no opportunity for public comment,” Ryan said.

“I would have laid that item on the table along with the governor’s budget,” he added, “so when the governor delivered his budget, it should have included the increase in his salary and the increase in the salary of Lieutenant Governor Kathy Hochul.”

“There’s nothing wrong with having a discussion about how we compensate the governor,” Girardin admitted. “He’s the chief executive. He oversees a really disparate organization with intense responsibilities. The problem here is that we never had any public discussion about it.

“We rushed this raise through in the middle of the night.”

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