Category: News and Opinion

New York’s pliable pension actuaries have been subject to severe criticism on this blog, and by actuaries that now write for publications and no longer need to be “team players” with politicians and unions in order to earn a living. After years of pension enhancements, pension funding cuts, and inflated estimated investment returns, we need to figure out what our situation actually is, and our future actually holds. So in the “do it yourself” spirit of an era in which there are few people and institutions left worthy of trust, I’ve decided to take a shot at it myself, with the simplified model in the attached Excel file. This post will describe the model, and attempt to estimate how much the public employee pensions promised (back when they were hired) to those approaching retirement would have cost (without any subsequent deals for pension enhancements in exchange for campaign contributions and political support), and how much should have been set aside to pay for them. The information discussed will be in the worksheet in the “promised” tab. A second post will try to estimate how much pensions have been underfunded due primarily to inflated estimated future investment returns, as noted in the “underfunding” tab. A third post will attempt to estimate the impact of some of the major pension deals I have been aware of over the years, among the hundreds passed and thousands proposed.

I find that for a typical New York government employee now approaching retirement (or recently retired early under some deal), a pension was promised that would have cost 11.8% of total pay during their careers, with 3.0% paid by the employee and 8.8% by the taxpayer, plus retiree health insurance for three years before Medicare carries most of the burden after age 65. For those in “physically taxing” jobs like sanitation workers, the promised pension would have cost 16.2% of their pay, with 13.2% from the government, and 10 years of pre-Medicare retiree health care. And for police/fire, it would have cost 29.6% of their pay, with almost all paid by the taxpayer and perhaps 21 years of pre-Medicare health care. But future taxpayers and service recipients (if there are any more services) will face a drastically greater burden.