Gov. David Paterson has committed himself to delivering much-needed property tax relief to New York homeowners. Testing that commitment, the Legislature has just sent the governor a bill that could increase local property taxes for years to comeunless he vetoes it.
Under the bill (S.B. 6457a), public-employee unions could veto any attempt to alter retiree health benefits for state and local government employeeseven if officials find a way to offer the same or similar benefits for less money.
The stakes are high for local governments and their taxpayers throughout New York, including the lower Hudson Valley. In 2007, for example, providing health insurance to 3,700 retired employees cost Westchester County $37 millionequivalent to six cents of every property-tax dollar collected by the county that year.
Westchester County is not alone. Other municipalities, school districts and the state government itself face similar mounting bills. Compounding the problem is that local governments don't bother to put aside money to pay for future benefits while retirees were still working (as is done for pension benefits). Instead government employers finance the retiree health benefits on a pay-as-you-go basiseffectively leaving it to future taxpayers to foot the bill for costly current promises.
Starting this year, new accounting rules require government employers to calculate the real value of all their retiree health-benefit promises. For New York's state government, the unfunded liability comes to $50 billion, roughly equivalent to Albany's entire outstanding debt. Westchester's unfunded liability is estimated at $1.1 billionconsiderably more than the county's total long-term bonded indebtedness of just over $705 million.
Once other local governments tabulate their future liabilities, taxpayers will have a strong new motive to push for reform before it's too late. To prevent that from happening, government employee unions are urging Paterson to sign a bill that establishes a one-year "moratorium" on non-negotiated changes in health benefits for all state and local government retireeseffectively freezing current benefits in placewhile a 12-member task force studies the issue.
But the task force, which would be dominated by union appointees, is merely a Trojan horse. Once a moratorium is in place, the Legislature is likely to annually renew it like clockwork, without debatejust as it has done under a similar law enacted in 1994, which has locked in retiree benefits for all school district employees.
During the moratorium period, a government employer could make changes in retiree benefits only if unions representing current employees agreed to the same changes for themselves. That's not likely to happen, given the experience of school districts. Some school districts pay in excess of $20,000 annually for health insurance for a retiree and family members. That adds up considering the average teacher in New York retires at 58 and is likely to live two, three or more decades.
Other school districts have been unable to restructure their prescription drug programs for Medicare-eligible retirees so the federal government pays more and local property taxpayers pay less.
Despite the concern legislators frequently express about skyrocketing property taxes, they passed the retiree healthcare insurance bill by 62-0 in the Senate and 137-7 in the Assembly. (No Lower Hudson Valley legislators voted against the bill.)
Ignoring pleas of local governments, legislators pandered to public-employee unions whose donations will help fund their re-election campaigns. Using the union cash, legislators will promise voters, if elected, they will cut their property taxes.