(Bloomberg News) New York Governor Andrew Cuomo proposed a $132.5 billion budget that links an increase in education spending to a new teacher-evaluation system and raises the retirement age for future workers, a move already drawing opposition from unions.

Cuomo's spending plan for fiscal 2013 closes a $2 billion deficit with no new taxes in part by finding $1.14 billion in savings from consolidating purchasing and human resources, he said yesterday in Albany, the capital. A tax deal reached last month that raised rates on those earning $2 million or more added $1.5 billion in revenue.

The proposal follows through on Cuomo's pledge to raise spending on Medicaid and education by about 4 percent. The boost in school aid will be tied to compliance with a new statewide teacher-evaluation system, a plan similar to one proposed last week by New York Mayor Michael Bloomberg. The governor suggested he expects opposition from the teachers' unions.

"There is a reform movement all across this nation that is shifting the focus onto the student rather than the industry," Cuomo, a 54-year-old Democrat, said to an audience that included legislative leaders and Comptroller Thomas DiNapoli. "We have to change our thinking from process to results, from the system to the individual, from salaries and pensions for people who work in the system, to the graduation rates and test results from the students."

Funds at Risk

In 2010, New York made a commitment to President Barack Obama's Race to the Top program that it would put in place a teacher-evaluation system. School districts haven't adopted a program the state designed, and the $700 million in federal funding the New York received is in danger of being recalled, Cuomo said.

Cuomo's plan requires school districts to put in place the new evaluation system by Jan. 17, 2013, or lose their share of the 4 percent increase in state spending, the governor said. Lawmakers approved the extra spending as part of last year's budget, bringing the total to $20.3 billion for fiscal 2013, or about $800 million more than in 2012. Federal officials have assured Cuomo that the Race to the Top grant can be saved if the state's more than 700 districts commit to evaluations, he said.

The first-term governor's pension plan, called Tier VI, would raise the retirement age for new workers and give them a choice of a state-backed pension or a 401(k) plan. The changes would save public employers in the state, including New York City, $79 billion over the next 30 years, he said. Cuomo proposed a similar bill last year that didn't include an option for a 401(k) plan. The Legislature didn't act on it.

No Gimmicks

"The governor's message will resonate with the business community, because it contains no political gimmicks and provides a clear road map to fiscal stability," Kathryn Wylde, president of the Partnership for New York City, a civic group composed of corporate chief executives, said in a e-mail.

Cuomo's budget is $225 million less than last year's, including federal funding. Spending cuts started in the 2012 fiscal year, and proposed to extend through 2013, would leave New York with a projected $715 million deficit for fiscal 2014, the lowest such projection in two decades, according to budget documents. The state's fiscal year begins April 1.

New York's $133.8 billion pension, the third-largest in the U.S., was 101.5 percent funded in 2010, better than any other state, according to an annual study by Bloomberg Rankings.

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