In March 2005, The Record revealed that more than 100 retired police officers with the New York Port Authority (PA) are getting at least $100,000 a year in pensions.  Because many senior PA cops were logging long hours of overtime, and because overtime is included in pension calculations, retirees are receiving up to double the pay they made in a normal working year.  At least 25 other PA retirees are getting pensions in excess of $100,000 as well.

The power to fix the pension problem lies with the New York State Pension System, which administers the Port Authority pensions. In the past year there have been no significant changes to the system.  Overtime remains high although it has dropped since the period following the September 11 attacks.   

Of course, it is not the PA that suffers the consequences.  The costs are borne by anyone who pays tolls on the George Washington Bridge, the Lincoln and Holland tunnels, and other PA facilities.

Unfortunately, the Port Authority is not alone in allowing overtime to be an oversized factor in determining pensions.  Two internal investigations released released in early February found that police officers in Allentown, Pa. may have intentionally padded their pensions with overtime before retiring. 

As reported in the Allentown Morning Call, a pension agreement reached in July 2005 allowed police officers to take early retirement and base their pension amount on a 30-day period of their choosing.  Many officers chose a 30 day period with extensive overtime from which to draw their pension pay after the contract was signed.  As a result, 54 officers took early retirement – some of them as young as age 36 – with pensions that in several cases exceed 150 percent of an officer’s salary at retirement.  The pensions, complete with health benefits and spousal extensions, will cost taxpayers an additional $6.9 million a year and an estimated $150 million over the life of the retirees.

The city, now under the leadership of a different mayor from the one who signed the 2005 agreement, went to the Lehigh County Court to get an order to stop paying into the pension fund.  Needless to say, the police union opposed this measure.  Looking for grounds to oppose it that would inspire more public sympathy than their obvious desire to keep their pensions bloated, the union argued that such an order would go beyond its desired effect and would hurt current and future retirees who take pensions according to more reasonable standards.  The two sides are currently involved in court-supervised negotiations.  Judge Lawrence C. Brenner has told the two sides to try to reach an agreement between now and April 10.

Maxwell Davison, who represents Allentown in this matter, said that one possible outcome would be to re-calculate the pensions to 70 percent of final average salaries.  While this would ease the taxpayer burden by tens of millions of dollars, it is still excessive.  According to the Employee Benefit Research Institute, most private and public pensions systems offer retirees 45 percent of their base salary after 30 years on the job.

Overtime problems and the need for pension reform are not exclusive to New York City and Allentown.  Albeit in slightly different forms, these issues have come to the forefront nationally thanks to efforts by President Bush to reform overtime rules and Social Security in 2004 and 2005, respectively.  These two cases could help push lawmakers at all levels of government down the path to reform.

-- Michael Brown