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New York City’s Last GASB?

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Confirming its prior analysis, and the analysis of independent actuary John Bury, the Center for Retirement Research at Boston College has once again found New York City’s pension plans to be among the most dangerously underfunded in the United States, this time in light of the new rules proposed by the Government Accounting Standards Board (GASB). The New York State pension plans, which also cover local government workers in the portion of the state outside New York City, are once again found to be among the best funded.

Noted actuary Girard Miller who writes for Governing Magazine, for those plans scheduled to run out of money in less than 25 years “without causing a panic, it's clear that the time has come for stakeholders, trustees and plan sponsors in these systems to ask penetrating questions and get to work on solutions — pronto. That includes the unions whose members must contribute to the solutions and stop playing the ‘not me’ entitlement game.” He lists 28 plans among those in desperate shape, including the New York City Teachers and New York City Employees, but the Boston College report only included larger plans. Other analyses have shown the NYC Police and Fire pension plans to be worse off than the NYC Employees retirement plan, though not as bad off as the Teachers. “This abyss,” said Miller, “is the result of a decade or more of benign neglect by all parties at the table.” Actually in New York, there have been additional retroactive pension enhancements in the past decade, and deals to borrow money from the pension plans to pay pension contributions, which is much worse than benign neglect.

A Difference Between San Francisco and New York

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In New York City, politicians continue to argue over extending policies that provide higher wages for workers with privileged connections to government money (or employees of firms with privileged connections to government money). One of the goals is to prevent the city from reducing costs and providing better public services for its people by contracting with private companies, by comparing the cost of the contracts with the cost of public workers excluding their greatest cost – the many years they get in retirement.

In San Francisco, on the other hand, there is a higher minimum wage for everyone – now $10.20 per hour. Not just for those with a special relationship with the government, who are then made better off than those with no such relationship. Now San Francisco is not the equivalent of New York City. It is the equivalent of Manhattan. So I wouldn’t argue that all of New York City should have a higher minimum wage. But perhaps Manhattan and the downstate suburban towns that zone out the working poor should. To offset the cost of getting to work on a transit system that New York’s political class is sending back to the 1970s. Or the risk of long bicycle rides on suburban roads where the Lexus SUVs might just cement your low status by running you over. The political class and the executive class do pretty well in SF also, but I guess they have some money left over for the serfs.

New York Explained (In One Chart)

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We had a bunch of unemployed young adults hanging out in a park who were demonized by the press until they were cleared out by the police. We have a state budget that the Governor says is falling apart. We have a nexus of public employee unions and politicians, the political class, that starts yelling about Goldman Sachs any time anyone brings up the deals they have relative to other people. They desperately want to blame the ongoing collapse of public services on inadequate taxation of millionaires. You have an executive class that hates, Obama, the Dodd-Frank act, and Occupy Wall Street for raising the issue of executive pay, particularly on Wall Street, and calls anyone who wants to talk about it a “socialist” who doesn’t want to get a job, presumably including their own investors.

It’s getting nasty out there, and among the angriest people are those who have in fact become much better off over the past 20 years while most people have become worse off. Here in New York, I’ve found a way to show who’s who and what’s what in one chart, which is linked here (I hope). It shows trends over 20 years for three groups of people – the executive class, the political class and the serfs, along with a couple of causal indicators. I suggest printing it out before reading the rest of this post. You’ll see two lines that track each other almost exactly. One is payroll per worker in the Downstate New York financial sector, adjusted for inflation. The second is the total payouts from the public employee pension funds of the City of New York. Both have soared, relative to what most people earn, and for the same reason – self dealing by powerful insiders at the expense of everyone else.

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