Long Island town and city pension costs rise to $137M amid new sweeteners, straining local budgets

Long Island town and city pension costs surpassed $137 million last year, up $13 million over 2024, as the expense continued to strain municipal budgets, a Newsday analysis found. 

State data shows two consecutive years in which the cost of funding employee and retiree pensions spiked across Long Island's 13 towns and two cities by more than 10%. The costs rose from $110 million in 2023 to $123.7 million in 2024, a 12.5% increase. A year earlier, the total had declined from $114 million to $110 million, a 3.6% drop, according to data from the State Comptroller's Office.

Last year, the total increased for every town and city on Long Island, jumping as high as 19% for Shelter Island’s police department.

More towns have pierced the state's tax cap, and they are citing the cost of employees' pension and healthcare plans as key factors. Village governments, which spent $86.4 million on pension costs last year, are facing a similar trend, state data shows.  

“It creates a tremendous amount of pressure because these aren’t costs that we can cut or change in any way,” Glen Cove Mayor Pamela Panzenbeck said in an interview. The city is facing a $3 million budget shortfall this year, nearly two years after emerging from the state's list of most fiscally stressed governments.

Local governments historically have offered pensions to recruit and retain workers. The idea was to compete with higher-paying jobs in the private sector, where pensions have  grown increasingly out of favor over concerns about long-term costs. While the state has tried to rein in benefits for newer employees, advocates have successfully pushed to restore some of them, prompting legislative battles in Albany.

New York has sweetened pension benefits in recent budget cycles. Changes in the 2024-25 state package ultimately boosted pension calculations of Tier 6 employees — municipal workers hired after April 1, 2012. The new calculation factors in the employees' three highest salaries, rather than five. When the sixth pension tier was created, the idea was to pare back benefits for newer employees and offer them less expensive benefits.

Changes in the latest state budget reduced contribution rates for municipal workers, shifting the burden on local governments and taxpayers, Newsday has reported.

‘Really was no choice’

Multiple towns pierced the state's tax cap in 2024 and 2025, citing rising pension and healthcare expenses. 

Becky Hansen, East Hampton Town's administrator and budget officer, said her office is constantly "bracing for impact" each fall when it's time to file the next year's spending plan. 

The town "did not take lightly to have to pierce the tax cap" for 2025, Hansen said. “There really was no choice.”

East Hampton established a pension reserve fund to offset increases to retirement benefits that the town is unable to absorb. In 2024, the town withdrew $400,000 to cover police pension expenses and $5,200 for other employee pension costs. The fund has about $1.6 million left, she said. 

In Huntington, Town Supervisor Ed Smyth said he expects to pierce the cap. Not piercing, he said last month, would be akin to "fiscal suicide."

The town experienced a 6.6% increase in its 2024 pension bill, which rose to $8.7 million that year. Then, it jumped by almost 14% in 2025, hitting $9.9 million. 

“The increasing amount in pension costs each year is another example of expenses the town has that are completely beyond our control,” he said in an interview. “The state comptroller gives us these numbers for pension costs, and we have to pay them.”

'Mathematically impossible'

Villages also are contending with spikes in pension bills.

From 2022 to 2023, village pension costs grew $4 million Islandwide, or 6.3%, to $67.9 million. Then, the cost jumped nearly $10 million in 2024, or 14.5%, rising to $77.8 million. By 2025, the total had grown by $8.6 million, or 11.1%, swelling to $86.4 million, state data shows.

In Oyster Bay Cove, a village of about 2,000, the majority of the budget is spent on its police force of 14 officers. The village was billed $971,378 in 2025 to cover police pension obligations, up 17.9% from a year earlier. Mayor Charles Goulding said balancing the budget as pension and healthcare costs rise is "a very challenging process."

"It's simple math," Goulding said in an interview. "If 80% of your budget is for workers with these kinds of large increases, you can't convert that into something 2% or below," he said, referring to the state tax cap limit. "I think that's why you're seeing all these villages and towns pierce the cap — it's mathematically impossible."

Shelter Island Supervisor Amber Brach-Williams said Tier 6 changes have had an outsize effect on the town's finances.

Shelter Island, with roughly 1,400 households on about one square mile of land, was billed $614,000 for pension contributions for first responders in 2025. That was up nearly $100,000, or about 19%, from the year before. Its bill for municipal workers went from $588,000 to $675,000, an almost 15% increase.

“It’s difficult, because where are we going to get the money from?” Brach-Williams said in an interview. “With us, there’s so little that we can do with our budget.”

Southold Supervisor Al Krupski said mounting pension costs, driven by the Tier 6 changes, will make it difficult for the town to stay under the cap. 

The town's pension bill for police department employees jumped nearly 10% to $2.6 million in 2025, data shows, and its cost for municipal workers rose almost 14% to $2.6 million over the same period.

"Well over half are Tier 6 at this point," he said of the town's workers. "Any time they give something to Tier 6, they're not giving something to towns. It comes out of our pocket."

Few recurring revenue sources

 There are few revenue streams governments can tap to cover shortfalls, municipal financial experts told Newsday.

 "If it pushes the costs up high enough, it’s not surprising that governments may need to turn to higher property tax rate increases,” said Ana Champeny, vice president for research at the Citizens Budget Commission. “Otherwise, they would have to reduce services.”

Some municipalities started the year by hiking fees and exploring spending cuts. Glen Cove raised the cost of construction permits and parking fees, while Smithtown eyed cuts to its vehicle fleet. In February, the Smithtown council raised fees on some residential and construction-related permits, such as doubling electrical permit fees to $100, Newsday has reported. In the spring, Islip officials sought an early vote giving the board permission to pierce the cap in the fall. The town board tabled the measure.

In this year’s state budget, weeks of negotiations led to further sweeteners, including lowering what employees contribute to their pensions and raising how much overtime factors into the payment.

John Mooney, president of CSEA Long Island Region 1, which represents around 45,000 active and retired workers across Nassau and Suffolk counties, said New York "is facing critical staffing shortages both at the state and local levels."

"Improving Tier 6 makes these jobs more attractive to qualified candidates and ensures that employees stay in these positions,” Mooney said in a statement. 

The average pension contribution rate for local governments will drop in the 2027-28 fiscal year from 17.6% to 17.3%. That figure covers workers in the employee pension system. Average contribution rates for workers in a separate Police and Fire Retirement System, or PFRS, will increase from 36.5% to 37.4% of payroll. 

Richard Vogel, dean of Farmingdale State College’s school of business, said if costs continue to climb, governments may have to adjust hiring practices, like relying more on part-time workers. 

“They have all those pressures,” Vogel said. “I’m not sure how they address them in the long term, but it is going to create some continuous political tension.”

Newsday's Deborah S. Morris and Arielle Martinez contributed to this story.