Author: Larry Littlefield

The Times on Pensions: The Unsaid Remains Unsaid

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Ron Lieber had a recent New York Times column that continues to avoid talking about what no one wants to talk about. According to Lieber “the big picture question…remains one that is more moral than economic. Decades ago, we made promises to government workers. Now, depending on your view, those promises have turned out to be too generous…Whatever your view, we now face a choice: Should all taxpayers (including the retired workers themselves) pay a lot more in taxes and accept large cuts in government services to pay for the promises to government employees? Or should we break the promises (by a little — or more than a little) because they have turned out to cost too much?”

The unsaid is this. In many cases, public employees are not due the pensions that were promised “decades ago” when they were hired. They are due pensions that were retroactively enhanced in deals with politicians in exchange for political support, with costs to others that were deferred, hidden, and fraudulently misrepresented. And taxpayers often didn’t fully fund the promises workers were made to begin with. The beneficiaries are past taxpayers, today’s seniors, who also left other debts and who now enjoy special tax breaks as retirees.

A New York Pension Question No One Has Answered

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There is a question about New York’s pensions I’ve been asking for years, but no one has been able to answer. Most objective analyses will tell you that the New York State pension system, which also includes all the local governments outside New York City, is in the hole, and residents of the rest of the state will face diminished services and higher taxes for years as a result. But those same analyses will also tell you that the New York State pension system is nonetheless one of the least underfunded among all public employee pension funds in the U.S. Comparative analyses of local government pension funds are rare, because there are so many and most are small. But according to those I have seen, which analyze large local pension funds along with the states, the separate City of New York pensions funds are among the most underfunded in the U.S. New York City residents, already faced with a higher overall tax burden and service cuts, will suffer even more as a result.

Why the difference? Why is the New York City Teachers Retirement System so much worse off than the New York State Teacher’s Retirement System, the New York City police and fire pension plans so much worse off than the New York State police and fire pension plans, etc.? How long has this been true? Are the benefits that much different? Has New York City never gotten out of the hole it got in after the Lindsay pension deals in the 1960s? Why didn’t various Comptrollers, actuaries and Control Boards require better of funding of the city’s plan in the years since? And if the city has been in the hole all along, how come the state legislature continues to impose pension enrichments on the city that are greater than or equal to those for the local governments in the rest of the state and the state government?

Ralph Nader Radical Capitalist

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It's behind a pay wall, but it is worth considering the gist of this WSJ article. "Ralph Nader, the scourge of American business and onetime presidential candidate, has found his next corporate demon: Cisco Systems Inc. Mr. Nader isn't calling for a router recall or claiming the company's networks are unsafe at any speed. Instead, he wants the tech company to pay a bigger dividend to boost its shares."

As a small investor, Mr. Nader is upset that corporate profits are accumulated in cash rather than paid in dividends for retirees like himself. With cronies on the board, he feels the purported democracy of corporations has been replaced by a self-serving oligarcy. He would be wrong if he were simply shortsighted, preferring money now to investment in the future. But that cash just sitting there might also be used for excess executive pay. So where are the institutional investors, handling other people's money, on this one?

Some Good News On Public Employee Pensions

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If this is true, I'll give Liu etc. their due. But it won't matter unless dividends rise as well.

"New York’s public pension funds, with $118 billion under management, have found a measure of success in pressing companies to end what most experts agree is an egregious practice — CEOs getting paid from company coffers to cover millions of dollars of their golden parachute tax liability. This year the pension fund, which includes the New York City Employees Retirement System, has negotiated behind the scenes with board members of at least four companies — Motorola Solutions Inc., Anadarko Petroleum Corp, WellPoint Inc., and R.R. Donnelley & Sons Co. After those talks, all of the companies revised their change-of-control pay plans."

Comptroller Liu’s Pension Report: Optimism, Misdirection and Disaster

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NYC Comptroller John Liu recently released a report and started an initiative to assure everyone that New York City’s public employee pension funds are fine. “Retirement Security NYC is a major initiative launched by Comptroller John C. Liu to protect the retirement security of public employees while ensuring the City's financial health,” with the retirement security portion intended to gain the support of public employee unions in a campaign for Mayor and the financial health portion intended to assure the city’s bondholders and wealthy and business taxpayers there is a limit to the extent to which their ox will be gored. The latest report is called Sustainable or Not: Pension Cost Projections Through 2060.

I have read the report, and have several problems with it. First, Liu piles up one rosy assumption after another. Next, his claims in big print in the front of the report, and in press releases, are much rosier than the detailed tables in the back of the report, even given the rosy assumptions. Third, those detailed tables lack the details required to figure out how the numbers were calculated. Finally, Liu endorses the Generation Greed position that it is perfectly wonderful if retroactive pension increases for those cashing in and moving out are offset by lower pay and benefits for future public employees. I get the feeling that the only way these reports can achieve their political objective is if no one actually bothers to read them, and write a post like this one. Or nobody bothers to read this post. My objections are detailed after the break.

Education Finance Repost

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It has been a heck of a couple of weeks. Between spam and all the Weiner traffic, I’m aware that some of those who wanted to read my series of posts on the latest elementary and secondary school finance data — and more important download the spreadsheets and print out the tables — may not have been able to do so. So I am attaching what I had written in an MS-Word document, along with the spreadsheets, to this post. The Word document may differ from what was finally posted, because I always find an extra typo or two right at the end. I’m not sure how the other writers on this site do it…at work all my reports have the benefit of an editor.

Care to Comment Mssrs Bloomberg and Schumer?

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From Bloomberg News: "JPMorgan Chase & Co. Chief Risk Officer Barry Zubrow will tell Congress that regulators risk impeding the economic recovery by going too far in tightening bank rules and raising capital requirements…A capital surcharge on the largest global banks combined with higher U.S. margin requirements for certain trading accounts 'currently risks doing more harm than good,'" and "puts U.S. firms at a 'distinct and unnecessary competitive disadvantage.'"

Funny, that's exactly what the financial industry convinced Bloomberg and Schumer to say in a report in 2007, a report I commented on in June 2008. The financial industry has clearly either learned nothing, or has learned that it could bully its way to increased concentration, power and bailouts. Has anyone else learned anything?

The Real SUNY and CUNY Issue

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The counter implies that I wrote about 11,000 words on comparative public school finance, addition to compiling the spreadsheets. There are probably those who think I’m more of a dweeb for that I do online than Anthony Weiner is for what he did online, particularly since I’m doing it on my own time. For those who read the four posts, downloaded the spreadsheets, and printed them, out congratulations – you now know at least as much about the subject as I do. To complete your education, and your dataset, you might want to read this post and download the spreadsheet with Census Bureau education finance data (from another data source) from FY 1972 to FY 2008 as a percentage of personal income.

Recently, the press was full of the sort of tribal issue that political types love to participate in and the media loves to report on. It seems that a playwright, who did not attend CUNY, was proposed to be granted an honorary degree by that institution, which perhaps wanted to highlight the excellent achievements of alumni of New York University and Columbia. But the proposed honorary degree was objected to and, I believe, not granted based on something the playwright may have said about Israel. Much outrage was engendered on all sides, and the real issue for SUNY and CUNY was safely ignored. That issue is as follows.

Trends in NYC Education Finance: Same Victims New Predator Part 3

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The previous three posts showed that after being underfunded in the past, spending per student in the New York City public schools soared to levels that by FY 2009 not only far exceeded the U.S. average after adjustment for the cost of living, but also exceeded (on average) other parts of the metro area in the Downstate New York Suburbs and New Jersey. But a large share of the increased spending went to a category in which New York City’s spending was already high – instructional employee benefits, particularly on the retired, as rich benefits for those not working and no longer working became richer still. So instead of money being drained from the classroom to got to the overfunded school districts in the rest of the state due to the state school aid formula, money has been drained from the classroom to go to the retired due to a series of retroactive pension enhancements.

FY 2009 is the most recent data from the U.S. Census Bureau, and thus the most recent data for which New York City education finance may be compared with the U.S. average and other places. This post uses New York City “Budget Summary” documents dated May 2009 and May 2011 to analyze how the city’s spending has changed from FY 2009 to FY 2011, and how it is proposed to change from FY 2011 to FY 2012. A spreadsheet is attached, with data in $millions. The data is not inflation adjusted, as inflation has been low in this period of recession, and compensation increases for most workers have been absent or negative. And it is not per student, as I don’t have enrollment figures and estimates for these years, just total. But if enrollment in FY 2011 is at the same level as it was in FY 2009, spending per student is up to $23,167 this year. An incredible sum.

Trends in NYC Education Finance: Same Victims New Predator Part 2

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As noted in my previous post on education finance, in FY 1996, total public school expenditure per student – with a cost of living adjustment for NYC – was 1.4% above the U.S. average in FY 1996, and 36.5% above the U.S. average in FY 2009. As we face ongoing cuts to the actual education provided by the New York City schools, this huge increase in the city’s relative spending has changed my understanding of what the cause of decreased educational quality is — underfunding compared with being cheated of fair value.

But most of those discussing education finance policy are either funded or supported by those with a self-interest in taking more for themselves, or tribally aligned with one position or another and unwilling to consider facts contrary to their world view. Thus, according to many people who have commented on my internet comments, posts or reports over the years, what has actually changed is that I have gone from someone in the pocket of the United Federation of Teachers who hates the suburbs and Upstate New York, to someone in the pocket of corporate interests who hates teachers and wants them to eat cat food when they get old. But while facts may interest only me, I’ve done the spreadsheets so I might as well discuss what they say.