The property tax time bomb

The Albany Times Union has a great story on-line today about the implosion of the state’s public employee pension fund, which has lost an astonishing $44 billion in the economic downturn.

This fund — when the stock market is booming — helps reduce the property taxes that we all have to pay to fund retirement pensions for New York’s state, county and local government workers.

But the collapse of this fund could trigger double-digit property tax hikes across the state.

Cities, towns, counties and even special entities like fire or sewer districts are obligated to make up any shortfall between what the pension fund is able to pay out and what their retirees are entitled to receive.

This whammy comes as Albany’s revenues are in free-fall, threatening local government subsidies; and as county sales taxes plummet. (The Press-Republican reported that Essex County has seen a 12% drop…)

Right now, local governments and school districts in the North Country are operating on temporary life-support.

Stimulus money from the Federal government is sluicing through the system, helping to keep property taxes down and services high.

But those grants dry up in 2011 and if local communities haven’t prepared, we could see unprecedented property tax rate hikes.

Governor Paterson is proposing a new “tier” of less generous pension funds for public employees. Is that a good solution?

If not, how should local governments and school districts cut costs?