I've often complained that everyone just talks about the state pension plans, while New York City pension plans, which cover local government employees working for the City of New York and New York City Transit, are ignored. Well NJ actuary and pension commentator has done all of us a favor, and calculated the bankruptcy data for major city pension plans on the same basis as his calculations for state plans. He finds the New York City pension system goes bust in 2023. Much to my surprise, that isn’t much different than the New York State plans. Which means that since existing workers can’t have their pensions cut (constitutionally) or their pension and health care contributions increased (politically), public services will be completely wiped out throughout the state with the nation’s highest tax burden at about the same time, in order to pay pensions without pension funds. (We may get a downpayment next fiscal year). And it doesn’t matter how much they cut the pensions, pay and benefits of future public employees, because they won’t be able to afford to hire any.
Now there are some Hail Mary scenarios to get out of this. One is massive inflation, which wipes out the real value of existing pensions and increases nominal returns (even as real returns stay low). Some people believe the Fed will inadvertently create high inflation while trying to avoid deflation. Others, however, believe a Japan scenario – no inflation or deflation, near zero rates of interest on savings, negative stock market returns over 20 plus years, and falling wages cannot be avoided.
The only good news in John Bury’s data is that some other pension funds will go bust first, so we’ll get a heads up on what is coming. I wonder if some state legislators will finally be voted out when the schools and the subways shut down. If so, they'll probably pass a bill to triple their pensions on the way out the door.