Since winning election to be New York's next governor on November 2nd, Andrew Cuomo has said he wants to cap property tax increases at 2% annually. But before he can submit a proposal to lawmakers - he won't be sworn in as governor until January 1st - local officials are trying to raise property taxes at rates above the proposed cap. The move comes as local governments are having trouble dealing with the large and growing costs of public employee pensions.
In the town of Troy, New York, the Republican mayor wants to raise property taxes 3% because the town expects to see pension costs increase 41 percent. The town's pension contributions account for the highest cost increase in the budget. Albany County also approved a 5% increase in the property tax rate. In New York, where the state administers public employee plans, local governments provide the contributions to the plans. In Fiscal Year 2011-2012, local governments will contribue 16.3% of a worker's salary to the pension plan, up from the current 11.9 percent. New York's State Comptroller's office say that this is the highest contribution rate increase in recent years.
Pension costs are rising because the economy is weak, workers are living longer, and generous benefits approved by local governments during boom years at the urging of public sector unions are now due. But the costs of pensions will only get a lot worse in the years ahead. A new report by the Empire Center for New York State Policy shows that local governments' contributions, financed by New Yorkers' tax dollars, to public pensions in New York will rise by billions of dollars in the next few years. According to the report, New York's major public pension funds face combined shortfalls of $120 billion when Empire Center used private sector accounting methods to calculate the estimates. This means that local governments could see contributions to the funds increase from $900 million to $4.5 billion over the next five years, which means that taxpayers could see a rise in their property taxes of 3.5% annually.
The increased costs of pensions also threatens to take funds from other critical government services, such as public safety, transportation, and education. If the prospect of losing critical governments services and the addition of high, annual property tax increases are not enough to engage the citizens of New York in demanding serious tax, budget, and pension reform from lawmakers, I don't know what is.