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By DANNY HAKIM and STEVEN GREENHOUSE

ALBANY =97 Gov. David A. Paterson on Tuesday proposed a steep rollback
of some of the generous pension benefits that have been an alluring
feature of government work for decades, initiating a contentious
reckoning with public employee unions.

The governor is proposing to reduce benefits for newly hired state and
municipal workers, including those in New York City, by placing them
in a new pension category. The New York City portion of the plan was
developed by Mayor Michael R. Bloomberg.

"We've made too many promises and asked for too few sacrifices," the
governor said during an address to the Legislature. "We're going to
have to change our culture as we know it."

The pension proposal was part of an austerity budget unveiled by Mr. Paters=
on.

One of the most controversial elements of the pension proposal would
require the city's police officers and firefighters to work 25 years
and reach age 50 before they qualified for a full pension. At present,
they can qualify for a full pension after 20 years of work, regardless
of age =97 a coveted perk known as "20 and out."

"Giving with one hand while taking away with the other simply makes no
sense," said Patrick J. Lynch, president of the Patrolmen's Benevolent
Association, who said that the city had only recently granted raises
that made it more competitive with suburban police forces.

"This proposed change to the pension for future police officers will
undo any progress made on compensation issues," he said.

Under the governor's proposal, workers in the state pension system
would have to work until they were at least 62, instead of 55. The
changes would apply to all state workers, many city employees,
including teachers, and employees of a number of municipalities
outside New York City.

New workers would also have to contribute 3 percent of their pay to
the pension system for their entire career; currently the
contributions stop after 10 years of service. And workers would no
longer be allowed to use overtime in their last year of service to
bolster their future pension payments.

Mr. Paterson's move is reminiscent of steps taken by many American
corporations over the last two decades, including changes initiated by
the Big Three automakers several years ago. While states are grappling
with shortfalls amid the deepening recession, New York's situation is
particularly dire. Not only is the state faced with a $15.4 billion
deficit, but New York's main financial engine, Wall Street, has been
diminished by the credit crisis.

Further, while savings from pension changes take years to fully pay
off, the value of pension funds has already been depleted by the
market's decline.

Still, the governor's budget will not pass without a major battle in
Albany, and changes to the benefits of city workers require approval
by the City Council.

Union leaders have close ties to lawmakers and have expressed outrage
that years of negotiated benefits are being swept aside. The Web site
of the Civil Service Employees Association called Mr. Paterson's
budget "possibly the worst in recent history."

And some of the proposals have been floated before, and rejected,
though the global financial crisis may have changed the political
calculus even for legislators in Albany.

Mr. Paterson does have a stick to pressure unions into accepting his
pension plan: layoffs. His budget proposes to lay off only 521
employees in a work force of nearly 200,000.

He demurred Tuesday when asked whether steeper layoffs could be
expected if the unions balked at his demands.

"I don't want to jump ahead of a negotiation or threaten the public
employee unions," Mr. Paterson said. "The public employee unions are
saying probably the same things that most of us would say if we
represented the workers, but inevitably they do have to come to a
conclusion that there has to be some redress for this budget deficit."

Other proposals by the governor call on current state workers to give
back a previously negotiated 3 percent salary increase next year and
defer a week's pay until they retire. His budget would also require
future retirees to significantly increase their contributions for
health care coverage.

In the city, pensions for uniformed service members =97 who include
police officers, firefighters, sanitation workers and corrections
officers =97 would vest after 10 years of service rather than the
current 5, meaning that at least 10 years of work would be needed to
qualify for even a minimal pension.

The city would also change the way pension payments were calculated to
mitigate the common practice of uniformed officers accumulating
hundreds of hours of overtime in their final year to maximize their
future benefits.

The governor's office also said that to help finance pensions, the
bill would require all new uniformed workers in New York City to
contribute 5 percent of their salary until they have 25 years of
service. For many uniformed workers, that 5 percent contribution would
be a significant increase above what they paid now.

The Bloomberg administration estimated that the proposed pension
changes would save the city $5.4 billion over the next 20 years.

Mayor Bloomberg was quick to applaud the proposal.

"Right now," he said "we are paying full retirement benefits to people
in their 40s. And especially as people are living longer, we simply
can't afford to do it forever.

"Our pension system is one of those areas where spending has grown to
an unaffordable rate. And we simply have to find a way to rein it in,"
Mr. Bloomberg said at a news conference on Tuesday.

One New York City detective, a 19-year veteran who spoke on condition
of anonymity so as not to violate Police Department rules, said that
"20 and out" was "one of my whole reasons for becoming a police
officer."

"I would say undoubtedly 95 percent of the people who come on this
job, that's a significant reason why," he said. "They don't do it for
the money."

Randi Weingarten, president of the United Federation of Teachers, said
the budget was "essentially a de facto reopening of a contract
unilaterally to cut wages" because it would require newly hired
teachers to continue contributing 3 percent of their pay after 10
years, the point at which most current teachers stop.

But after years of Albany lawmakers sweetening pensions to please
labor leaders, some analysts thought the governor needed to go much
further.

"It's a return to the early '90s status quo," said Edmund J. McMahon,
director of the Empire Center for New York State Policy, a
conservative research group. "I wouldn't call it pension reform."

Charles M. Brecher, research director for the Citizens Budget
Commission, a business-backed watchdog group, praised the move.

"Pension costs have been growing rapidly," he said. "Pension benefits
are far more generous than what exists in the private sector, and it's
a necessary step to get some structural balance in the state and city
budget."

Danny Hakim reported from Albany, and Steven Greenhouse from New York.
Michael Barbaro and Joel Stonington contributed reporting.

<http://www.ft.com/cms/s/0/28c2cd6e-cc5a-11dd-9c43-000077b07658.html>
Motorola slashes pension benefits
By Richard Waters in San Francisco
Published: December 17 2008 17:03 | Last updated: December 17 2008 19:48

Motorola has slashed its employee pension benefits to save cash,
adding to a growing list of US companies that have retreated on
pension promises as the slumping economy has put pressure on finances.

Pension cuts are set to become far more common in the new year unless
US companies are given more time to make up for pension shortfalls
caused by the recent collapse in stock and bond markets, warned Mark
Ugoretz, president of the ERISA industry committee, which represents
big employers.

The struggling electronics company's decision on Wednesday to suspend
payments to its US employees' 401(k) pension accounts comes a week
after Xerox took a similar step.

Both companies described the moves as temporary, although they made no
promises about when, or if, they would be able to reinstate the
payments.

Other companies to drop the pension payments in recent months as the
recession has deepened include General Motors, rental car company
Dollar and real estate firm Cushman & Wakefield.

Motorola also announced that it would freeze its US defined-benefit
corporate pension plans permanently and that it would only make
payments into the plans in future to ensure that existing accrued
benefits were maintained.

Like many US employers, the company had already closed the
defined-benefit plans to new employees at the start of 2005,
reflecting a wholesale move away from pensions that are tied to an
employee's final salary.

The latest step means that Motorola pensions paid out of these plans
will be based only on present salary levels and future retirees will
not see any topping up to reflect pay rises during the course of their
careers.

The rapid erosion of defined-benefit plans has left American workers
increasingly reliant on their 401(k) accounts, which are based on the
value of their own contributions.

The vast majority of companies also make their own matching
contributions to these accounts, replacing the contributions they used
to make to defined-benefit plans, though most 401(k) rules are written
in a way that gives companies the right unilaterally to scrap the
payments.

Dropping the 401(k) contributions could save Motorola $80m a year,
based on its payments in 2007. The company also indicated that some
employee benefits outside the US would be cut back.

In a gesture by its most senior executives, Motorola said that its
co-chief executives, Greg Brown and Sanjay Jha, would take a voluntary
25 per cent cut in base salary next year, along with cuts to bonuses.