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Mike Groll, Associated Press
New York City Mayor Michael Bloomberg testifies before a joint legislative budget hearing on local government in Albany, N.Y., on Tuesday, Jan. 24, 2012.

ALBANY, N.Y. — New York City Mayor Michael Bloomberg said Tuesday that with an $8 billion pension bill squeezing the city's finances, state legislators should back the governor and create a new lower pension tier for future municipal and state workers.

The city's pension costs have risen 500 percent from $1.5 billion in 2002 when Bloomberg took office and now comprise 12 percent of the budget, equivalent to combined operations of the police, fire and sanitation departments, he told a joint legislative budget committee. The new pension tier would save the city $30 billion over 30 years without costing current workers anything, he said.

"It would raise the retirement age, exclude employee overtime from pension calculations, bring progressivity into employee pension contributions and institute shared risks and rewards that would reflect the fluctuations in the market," Bloomberg said. "It would also offer new employees the choice of a defined contribution option, with a flexibility and portability that many may find a better, fairer choice for them."

Unionized state workers have criticized Democratic Gov. Andrew Cuomo's pension proposal, arguing a new lower tier was enacted only two years ago, most pensions are less than $30,000 and defined benefit plans like theirs are critical to middle-class retirement security.

Bloomberg, an independent, said most estimated returns on pension plan investments are unrealistic.

"The answer is, in the end, we cannot afford these pensions," Bloomberg said. "We have no obligation to people we have yet to hire."

Asked afterward whether it is realistic to continue police and firefighter terms, with eligibility for half-pay pensions after 20 years of work, Bloomberg said that was established under then-Mayor John Lindsay, who was in office in the last 1960s and early '70s.

"I think the better question is: Do you think it's realistic to end that practice?" Bloomberg said. "Nobody in the private sector has that luxury, but there are a lot of things public servants have that are not available in the private sector."

He said creating a new pension tier is a good way to "rationalize" the system without penalizing those who have been working under prior agreements.

The president of the New York City Patrolmen's Benevolent Association, a police union, said the pension benefit has existed for 100 years and part of the compact the city makes with people who do that job.

"Similar pension benefits exist for police officers nationwide, and it would be a testament to how far this city has fallen if the nation's finest police officers were offered second-class pension benefits," PBA President Patrick Lynch said. "It is in fact too costly not to pay the compensation and benefits necessary to attract qualified candidates to this difficult and dangerous profession."

Bloomberg also supported Cuomo's proposals for testing public school teachers and transferring control and funding to the city for operating state juvenile detention facilities located there. He endorsed Democratic Assembly Speaker Sheldon Silver's proposal for "a responsible increase" in the state minimum wage above $7.25 an hour.