Category: News and Opinion

This is my third post on a tabulation of Census Bureau data on public employee pension plans in New York and New Jersey over the decades. The first was on the separate pension funds for teachers. The second was on the large plans that cover most state and local government pensions in the two states. This post is on the separate pension plans for New York City and New Jersey police officers and firefighters. Although they have different benefits, police officers and firefighters in the rest of New York State are covered by the same state pension system that covers most public employees, and data for police and fire is not reported to (or collected by) the Census Bureau separately.

The data show that the New York Police Pension Fund Article 2, the New York City Fire Department Article 1B Pension Fund, and the New Jersey Police and Firemen's Retirement System are deep in the hole. In the most recent year for which data is available they paid out the equivalent of 8.0% to 10.0% of their assets, but those assets ought to be sufficient to pay all of the benefits owed to current retirees, most of the benefits owed to those soon to retire, and some of the benefits owed to younger workers. And given how generous pension benefits are for New York and New Jersey’s police officers and firefighters, that means there ought to be enough money in the funds to pay monthly benefits for decades. There isn’t. And in the case of the NYC firefighter’s fund there hasn’t been for decades. The charts and discussion are here on Saying the Unsaid in New York.

In our last visit together, we began our exploration of the November election returns with a look at the most interesting local race; we now turn our attention from the undercard to the main event:

This is the first of Rock Hackshaw's three-part series on the passing of Nelson Mandela.

In this country, whenever I want to find the best coverage of unfiltered news on cable television, I go to CSPAN. For the most part you only have to bring your intellect to the viewing chair. It seems as though most of the other networks aim to either indoctrinate or proselytize. I doubt that’s an objective at CSPAN.

New York City and New Jersey have more than one pension plan for public employees. There are separate plans for teachers and related workers, for police officers and firefighters, and big plans for just about everyone else. My prior post in this series, which this post will assume the reader has read, was about the New York City, New York State, and New Jersey teacher pension plans, with the New York State plan covering teachers in the part of the state outside New York City. This post is about the big plans for most public workers: the New York City Employees Retirement System (NYCERS), which also covers New York City transit workers, the New York (state) Public Employees Pension and Retirement System, which also covers local government workers (including police officers and firefighters) in the rest of New York State, and the New Jersey Public Employees Retirement System.

I thought this post would be written very quickly, because the trends and situation would be the same as it was for the teachers. But when I put data from the database of long term Census Bureau data into the same charts that I used for the teacher pension plans, I found that wasn’t the case for New York City. The various retroactive pension increases and incentives over the years had less of an effect on inflation-adjusted NYCERS benefit payments than they did on benefit payments by the Teachers Retirement System of New York City. But NYCERS is nonetheless only slightly better funded than the NYC teachers pension plan, because the extent of taxpayer pension underfunding has been greater. Indeed, unlike the pension plan for NYC teachers, NYCERS never really got out of the hole after the big pension increases under former Mayor Lindsay in the late 1960s. Further discussion and a spreadsheet with a series of charts are here on “Saying the Unsaid in New York.”

It’s a little late but I wasn’t able to really dig deeply into the NYC Primary numbers until recently, so here’s some of what I found by matching the 2013 Primary voter history to the Prime New York Voter File.

A Surprisingly Large Number of Non-Prime Democrats Voted

GATEMOUTH (December 20, 2009): Listening to the complete Aladdin Recordings of Charles Brown; essentially what the King Cole Trio would have sounded like if they were black

As noted in my previous post, I have downloaded and arranged all the data the U.S. Census Bureau has collected since 1957 on currently active public employee pension plans in New York and New Jersey. I wanted a historical record of how future generations were left with this mess, a record older generations and the political class have little incentive to compile. This is the first of a handful of posts using this data; hopefully someone else will do even more with it sooner or later. This post is about the New York City, New York State, and New Jersey teacher pension plans, which also cover some related employees.

The data shows that in New York City the road to ruin was paved primarily with a series of extremely expensive pension benefit increases, employee contribution cuts, and one time “incentives” that vastly inflated the amount the NYC teacher pension plans paid out. Not shown by this data is a similarly large increase in the cost of retiree health insurance, as the city was forced to pay retirees for many additional years before Medicare picked up most of the burden. The pension benefit increases for the New Jersey teacher pension plan and the New York State teacher pension plan, which covers teachers in the rest of New York State, were not as frequent or as costly. New York City taxpayers may have also underfunded the city teacher pension plan, relative to the state, after a New York State Court of Appeals decision prevented the state pension plans from doing the same. The NYC teacher pension plan has also had lower investment returns over the long term. In New Jersey, taxpayer pension funding virtually disappeared starting in the mid-1990s, and is the primary cause of the crisis there. Further discussion and a spreadsheet with a series of charts are here on “Saying the Unsaid in New York.”

Let say you are in charge of running a pension fund, and it consists entirely of one paper asset that cost $20 to acquire and entitles the fund to a payment of $1 per year, which can be used to pay benefits. How much money is in your pension fund? Twenty dollars. And what is your expected future rate of return on your investment? Five percent, because $1 is 5.0% of $20. But let’s say that as a result of a speculative bubble, people start buying and selling pieces of paper identical to yours – and still only paying $1 per year – for $100? Then how much is in your pension fund? You probably shouldn’t, but you might say $100. But then, how much is your expected future rate of return? If you were honest you might say one percent, because $1 is 1.0% of $100.

But if you were the typical public employee pension fund manager of the past 15 years, and the typical actuary such funds were willing to hire, you would probably say the future rate of return was still five percent — even though you were only getting one dollar, not five dollars, in cash return, and even though 5.0% of $100 is $5, not $1. Because, it would be assumed, the trading price the piece of paper would keep going up and up. Or you might say that the future return would be ten percent, even though you were only getting one dollar and not ten dollars. Because it would go up even faster. That would allow you to hand out retroactive pension increases for politically powerful public employee unions, even though no money had been set aside for the added benefits during most or all of their career, and claim it would cost nothing. And/or underfund the pension fund, to divert money to other more politically powerful priorities. The nature of the pension lie was double counting: counting both the inflated asset values and the same, or a higher, rate of return from those inflated values. That lie is still being told today. Ordinary people not in on the deals, particularly in younger generations, will pay for the consequences of that lie for decades.