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June 12, 1995 01:00 AM

NEW YORK'S BUDGET TAPS PENSION ASSETS;MCCALL VOWS TO FIGHT USE OF FUND

Terry Williams
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    The raid of the $60 billion New York State & Local Retirement Systems is on.

    The New York Legislature last week passed a $68.6 billion budget that uses two-thirds of the retirement system's $360 million Supplemental Reserve Fund to help balance the budget.

    The fund is used to pay retiree cost-of-living increases.

    The bill awaits Gov. George Pataki's signature.

    State Comptroller H. Carl McCall, the sole trustee of the retirement system, opposes the use of pension assets to balance the budget. He has threatened legal action against Gov. Pataki, the state Assembly and the state Senate.

    "I will not be party to this extortion," said Mr. McCall, in a prepared statement.

    "I will fight for the supplement and against the raid with every tool - including legal action - available to me."

    The budget deal between Mr. Pataki and the Democratic Assembly and Republican Senate links the payment of cost-of-living increases to the use of the supplemental fund for budget purposes.

    According to the deal, $230 million from the supplemental fund will be used to cover budget shortfalls for the state and local governments.

    The remaining $130 million will be used to pay retiree cost-of-living increases.

    Mr. McCall said he supports the Legislature's decision to pay retirees a supplement, but not at the expense of misusing the pension fund.

    "In a cruel and cynical gimmick, the supplement has been linked to a raid on the pension fund," Mr. McCall said in his statement.

    "The governor and Legislature are holding retirees hostage, trying to force me to pay political blackmail: let them raid the pension fund, or they'll take benefits away from hundreds of thousands of retired civil servants.

    "If the governor succeeds in raiding the pension fund for $230 million this year, he'll be back again next year, looking for even more."

    According to the bill, cost-of-living adjustments for New York State employees have not been granted to retirees since 1988. Those who retired since 1982 have never seen any adjustment to their pension allowances.

    There is no provision in the law for COLAs, so public employees rely solely on the Legislature and the governor to grant increases to their pensions.

    New York's comptrollers have a history of initiating lawsuits against the state's governors on pension issues. In 1990 Mr. McCall's predecessor, Edward V. Regan, successfully filed suit against former Gov. Mario Cuomo, who had changed the state's funding of the pension fund for budget purposes.

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