At this point, only insiders know what it is that Governor Cuomo is proposing for public employee pensions in New York. But we do know this; the pensions that most recently retired and soon to retire public employees were promised back when they were hired were not “unsustainable.” They were made unsustainable in subsequent deals. We are suffering higher taxes and diminished public services because older generations cut deals with themselves to drastically enrich those pensions and inflate their cost. And now, according to the Governor and Mayor Bloomberg, future hires will receive retirement benefits that are worth far less than what current generations had been promised to begin with. And every institution, including the media, run by Generation Greed cheers.
But no one will connect the two. No one will explain why younger generations deserve so much less in retirement than older generations. And why older generations, retired and current workers, should not be made to sacrifice as well to offset the harm their self-dealing created. And no one will tell younger generations the truth – that they will be less well off than those who came before, on average, at each point in their lives because of what was taken by those who came before and continues to be taken by those who came before, at their expense.
What do they say about this inequity? Nothing. What could they say?
They can’t say that it is legally impossible to take anything back from existing employees and retirees. It is legally impossible to “reduce of impair” their pensions, according to the state constitution. But it is not legally impossible to take away their retiree health insurance to make up their retroactively enriched pensions. And it is not legally impossible to make them contribute more to those retroactively enriched pensions. In fact, in California Governor Jerry Brown has proposed forcing existing employees to contribute one-half the “normal” cost of their pensions. Ie. not including the extra cost because those existing employees also got their pensions retroactively enhanced and no money was set aside for it. He has also proposed banning further retroactive enhancements.
Now lets say the Governor doesn’t want to do any of those things. It is not legally impossible to demand that all wage increase go exclusively to those receiving diminished retirement benefits in the future, or on the wrong end of “screw the newbie” contracts in the past, until all the inequities between people hired at different times in TOTAL compensation are equalized. This can be written into the state labor relation laws with regard to arbitration, and jawboned for local officials reaching agreements outside of arbitration.
It is worth noting that what the unions want, and what Mayor Bloomberg has agreed to, is lower cash pay for new employees as well as diminished pensions, to inflate the pay and pensions of those cashing in and moving out. So less qualified and motivated workers are hired, public services are worse, and everyone can get away with doing a worse job. Bloomberg agreed (later denying he did) to cut the starting pay of police officers and firefighters to $25,000, and most new city workers by 15 percent and teachers by 6 percent for teachers, compared with those who were hired before. The unions loved it, and fought to prevent police and fire starting pay from rising when Bloomberg changed his mind. The newspapers celebrated the victory. The Citizen’s Budget Committee loved it.
Ok, lets say that because the state legislature consists entirely of members of Generation Greed who have been making the common future worse in every way for their entire careers to pay off selfish people like themselves, you have to stick it to future workers. You know what? It doesn’t cost any money, and it doesn’t require any approval, to tell the truth. To tell future workers that they will be drastically worse off to pay for deals to benefit older workers. Tell them when they are hired. Tell existing workers, and existing retirees, that future workers will be less well off than they were, to pay for the deals they got. Maybe they’ll be grateful. More likely, they won’t want to hear about the connection between what they have grabbed for themselves and what is left to their successors. They consider themselves entitled to a rationalization to go with their unearned privilege. Too bad!
The truth is bad politics for Governor Cuomo? Well Mayor Bloomberg doesn’t’ have to worry about that, does he? Who is he lying to? Himself?
A few notes about what might be proposed. I plugged a half pay pension at age 65 after exactly 30 years of work into the typical salary progression of a New York City teacher. Assuming an employee contribution of 6 percent of wages, 2.1% inflation and a 7.0% return (not that I believe it, but that is what the city has decided to assume), the taxpayer contribution for the pension of future teachers would be 2.4%. Using NYC Comptroller John Liu’s fraudulent accounting, the taxpayer cost for the new teachers would probably be less than zero. If some teachers end up leaving before reaching their full pension and leaving money behind, of course, it would be less. Bottom line – the plan is to make future workers pay for what past workers have done.
The current taxpayer contribution for current New York City teachers? It is 32.5% of pay, according to last year’s budget documents. And even with the optimistic rate of return assumption, which does not been the proposed Government Accounting Standards Board criteria, the City Actuary now says that isn’t enough – but recommends that the city intentionally underfund its pensions and risk having the city go bankrupt later, rather than having public services further devastated right now. How does a 32.5% employer match compare with your 401K?
But don’t worry, they’ll cut the pay and benefits of future teachers so low only incompetents and grifters will take the job to make up for it.
Now how about that 401K option? The Governor and Mayor have proposed making the future pension plan “progressive” by making higher paid workers contribute more. But the 401K option would be regressive, because the taxpayer would only put up 4.0% unless the employee had the money to put up more than 4.0%. Better off employees will have the money to get the higher match, while worse off employees were not. How about offering a 401K equivalent with an 8.8% employer contribution and a 3.0% employee contribution? That is the cost, by my reckoning, of the pensions Generation Greed was promised to begin with. They grabbed more afterward. Lots more.
Not only that, but it is likely that the taxpayer contribution for future workers would be eliminated as apart of a union deal to once again enrich those cashing in and moving out. The unions would bargain, or seek in arbitration, the elimination of the 401K payment by taxpayers in exchange for bigger raises for those about to retire with pensions, inflating those pensions. Union support for politicians seeking higher office could be part of the deal. You know they will do it. The head of the United Federation of Teachers introduced a proposal to increase the voting power of retired teachers relative to those actually working the day after Cuomo introduced his plan.
New York’s existing public employees and retirees have committed a social injustice against the public at large. When current workers were hired, there was a promise made that they would provide public services in exchange for their pay and pension. Instead, they broke the promise, cut deals to retroactively enhance their pensions, and took public services away to pay for it. And Peter Abatte is probably introducing legislation in Albany to do it more as we speak. Would there be any reason to believe that Generation Greed will keep the promise to future workers after they have signed on to the 401K? Any legal requirement that can’t be taken back?
Let’s not kid ourselves. This is just more of the same – Generation Greed seeking new ways to rob younger generations to pay for everything they have promised themselves but refused to pay for. This is just stage two of the “screw the newbie, flee to Florida” cycle. With regard to teachers, Mayor Bloomberg has been in on both ends of it.
If there were any justice, employees who got the benefit of past deals would not receive a single raise until their real pay had fallen 20%, to offset the cost of past pension deals. Existing retirees would be paying for half or all of their health insurance until the pension plans got out of the hole, as measured by real numbers. And retirement income would be taxed at the same rate as work income, not exempted from taxes.