Pension payoff delay will cost city billions

Governor Kathy Hochul has signed into law a reamortization plan for New York City’s five pension plans that would extend the city’s timeline to pay off its liability, stabilize the amount the city pays every year but ultimately increase the city’s financial burden by billions of dollars. The plan, advanced by Mayor Zohran Mamdani in the first executive budget of his tenure, would save the city an estimated $2.2 billion over the next two years but burden the city, the MTA, New York City Housing Authority and other public-sector employers with a total of over $7.6 billion in additional costs through Fiscal Year 2037.

Of that $7.6 billion in extra costs, the city would be directly responsible for around $6.5 billion of it, a City Hall official said.

Under the original amortization plan created in 2013, the amount the city paid off increased each year — by as much as $6 billion in the final year, Mamdani said in early May when introducing the reamortization plan to help close the city's budget gap, until the liability was fully paid off in Fiscal Year 2032. The new plan not only extends that schedule by five years but alters the payment plan so that the city pays off a similar amount each year.

"That is an extension that would ensure that we would pay the same amount every single year as opposed to what is currently a variable amount increasing year after year," Mamdani said at the time.

The city would pay around round $1.74 billion yearly until the pension liabilities are nearly paid off in full in FY37 according to an analysis on reamortizing all five city pension funds conducted by from John Murphy, the former executive director of New York City Employees’ Retirement System. 

“I was worried about costs ballooning up on them but they won’t, it's on a flat payment schedule,” said Murphy, who ran NYCERS from 1990 to 2005. “Which is a positive.”

When Mamdani initially proposed the plan, it won support from Andrew Perry, director of fiscal research at the Fiscal Policy Institute, a finance think tank, who argued in a blog post that the new plan was an “act of prudent fiscal management.” 

But the billions in new costs, when combined with the reforms of the Tier 6 pension plan this year that will cost public-sector employers an additional $1.6 billion through FY37, frighten some other fiscal analysts. Citizens Budget Commission president Andrew Rein said in a statement on the final budget that the increased Tier 6 costs will “pressure local governments and school districts to cut services or raise taxes to fund benefits that are already excellent."

He called the reamortization plan a “pension gimmick that unfairly shifts some of the cost of closing near-term City budget gaps to taxpayers in fiscal years 2033 to 2037.”

Monica Klein, a spokesperson for Mayor Mamdani, in a statement, defended the plan.

"The Mayor inherited a budget gap that rivaled the Great Recession, and took numerous steps to drive this deficit down to zero, deliver a balanced budget and restore our city's fiscal health,” she said. “We are proposing to restructure pension payments to create consistent annual payments, ensure long-term stability, and protect retirees and their benefits."

'It's going to cost the city'

Reamortization plans have been floated in previous years but this first public proposal this budget cycle was put forward in the City Council’s preliminary budget response alongside a proposal to issue pension obligation bonds, a scheme that wasn't advanced. Former Mayor Eric Adams also once proposed to reamortize three of the city's pension funds in early 2025, but the push failed in Albany

Marianne Pizzitola, president of the New York City Organization of Public Sector Retirees, while grateful for the pension improvements, also criticized the reamortization plan. 

“It's going to cost the city more over the long term,” she said. “They kicked this down from 2010 to 2026 and were kicking it down again. That to me is still a concern." 

Ken Giardin, a fellow at the conservative Manhattan Institute, found fault with the plan.

“The city has a simple problem. It has been spending more than it takes in,” he wrote in an email. “That problem predates Mayor Mamdani, but he's continuing it, in part with this pension gimmick, because he doesn't want to be accused of practicing 'austerity.' The mayor isn't rejecting austerity—he's just deferring it, with interest.”

In order for the reamortization plan to move forward, leadership at the unions with the most workers in each of the five pension city pension funds will have to sanction the plans. The Police Benevolent Association and Detectives’ Endowment Association, whose members are part of the New York City Police Pension Fund, have already signaled it won't allow the fund to be reamoritized.

Leadership of the Uniformed Firefighters Association, the United Federation of Teachers, District Council 37 and Transport Workers Union Local 100 have yet to take a stance on reamoritization. But the unions have supported amortization before, and the plan does not effect retiree benefits, only taxpayers' obligations.

Murphy, the former NYCERS director, said that while the extra pension costs will likely burden the city in the next decade, the budget deficit that Mamdani had to contend with necessitated strong action.

“If there's a hole in the boat today, you gotta fill the boat. Murphy said. “The storm that’s coming six years from now, we'll deal with that then, but if  you don’t fill the hole right now we're sinking.”