The New York (STONY1) Legislature approved much of Governor Andrew Cuomo’s pension overhaul by raising the retirement age for most new workers and for the first time offering a 401(k)-type option to some nonunion employees.

The deal was among a package of bills passed yesterday and today during an all-night session in Albany that redraws voting district lines, sets up a teacher-evaluation system, authorizes a constitutional amendment that would legalize casino gambling and expands a criminal DNA database. The governor, a 54-year-old Democrat, is expected to sign the measures, according to legislative leaders and administration officials.

“This bold and transformational pension reform plan is a historic win for New York taxpayers and municipalities,” Cuomo, who included the pension overhaul in his $132.5 billion budget proposal in January, said in an e-mailed statement today. “Without this critical reform, New Yorkers would have seen significant tax increases, as well as layoffs to teachers, firefighters and police.”

In a radio interview with Talk 1300’s Fred Dicker about three hours after passage, Cuomo said lawmakers made a “good start” on the budget, which will be “way less controversial than last year.” New York’s fiscal year begins April 1.

Raising Contributions

New York’s retirement fund, the third-largest U.S. public pension, had 101.5 percent of the money to pay its obligations in 2010, better than any other state, according to an annual study by Bloomberg Rankings. To keep it there, the system has raised the contribution rates the state and local governments pay annually.

Cuomo has said pension costs will consume 35 percent of local-government budgets by 2015, up from 3 percent in 2001. Today’s deal is expected to save $80 billion over 30 years, Josh Vlasto, a Cuomo spokesman, said in an interview. The pension- change plan is known as Tier VI because it creates a sixth level of benefits.

The deal was reached as Cuomo threatened lawmakers with a veto over voting district lines redrawn to meet population shifts recognized in the 2010 U.S. Census, union officials said.

“Tier VI shoved down the throat of state legislators fixated on their own self-preservation will be devastating to 99 percent of New Yorkers,” Danny Donohue, president of the Civil Service Employees Association, the state’s biggest public-worker union, said in a statement. “This deal is about politicians standing with the 1 percent -- the wealthiest New Yorkers -- to give them a better break while telling nurses, bus drivers, teachers, secretaries and laborers to put up and shut up.”

No Relief

Localities will see no relief in the short term from the new tier and will be hurt by loss of state services, downsizing and consolidation of facilities, the union said.

The pension overhaul affects only new workers, raising the retirement age for most to 63 from 62, and increases the contribution rate for those who earn more than $45,000 to between 3.5 percent and 6 percent from 3 percent. Those with an annual salary of less than $45,000 contribute 3 percent. It also reduces the percentage of the final average salary used to calculate annual retirement payments.

Cuomo originally sought a retirement age of 65 and didn’t get the 401(k)-type option he wanted for every worker, though employees who aren’t union members and earn at least $75,000 a year will be able to invest in the plan. The governor said he was flexible like a “veritable Gumby” on the 401(k) option.

Pension Cuts

A record 43 states from 2009 through 2011 cut public- pension benefits to reduce costs following the longest recession since the 1930s, the National Conference of State Legislaturessaid in a report released yesterday. Former Governor David Paterson in 2009 reached a deal with unions and lawmakers to raise the retirement age and increase worker contributions that was expected to save $35 billion over 30 years.

Cuomo’s pension agreement marks another victory for him over New York’s unions. Last year, he won wage freezes and furloughs from the state’s two biggest unions after threatening to fire almost 10,000 workers if they didn’t agree to the contract terms that saved $450 million.

When Cuomo announced his pension-change plan, he was met with opposition from public unions as well as Comptroller Thomas DiNapoli, a fellow Democrat and the sole trustee of the $140.3 billion pension fund.

‘No Quick Fix’

In a statement after the vote, DiNapoli said Tier VI “will not significantly lower costs for local governments in the short run.” He said he was pleased the plan doesn’t include Cuomo’s original 401(k) option.

“There is no quick fix to addressing rising pension contribution rates driven by the financial market meltdown in 2008-09,” DiNapoli said. “Despite strong investment returns and two new pension tiers in less than three years, these rates will likely continue to increase in the near future.”

In television commercials, on billboards and in public appearances, union leaders said today’s changes were an attack on the middle class.

Cuomo’s backers, including a coalition of local leaders led by New York City Mayor Michael Bloomberg and the business- supported Committee to Save New York, produced advertisements that threatened firings of local employees if changes weren’t made to the pension system.

The original proposal would have saved states and cities, including New York, $113 billion over 30 years, Cuomo has said.

‘Landmark’ Deal

“There’s not a single element of the plan that hasn’t been changed or negotiated,” Micah Lasher, the mayor’s director of legislative affairs, said in an interview in Albany. “The governor started out with $30 billion in savings and it looks like we’ll end up with two-thirds of that.”

The pension overhaul was a “landmark” deal representing big savings for city residents, Bloomberg said in a statement e- mailed today.

“As a result of Governor Cuomo’s leadership, city taxpayers will save $21 billion over the next 30 years,” he said. “Not a single current government worker or retiree will be affected, and not-yet-hired city workers will continue to be able to retire securely.”

The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.

To contact the reporter on this story: Freeman Klopott in Albany, New York, atfklopott@bloomberg.net