The Latest

Time Travel for Pension Costs: How It’s Done

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We are just a couple of days past a ten-year anniversary. On July 11th 2000, then-Governor Pataki signed one of the biggest of the recent pension enhancements. Comptroller Carl McCall had pushed for some of the changes, which had passed the legislature several times without any votes against but had previously faced Pataki vetoes, and New York City Mayor Giuliani had pushed other changes as part of a deal he had cut with the public employee unions. Pataki, Giulani and McCall, all looking for support (or neutrality) in runs for higher office at the time, claimed that the pension enhancements (which will be discussed in the next post) would cost absolutely nothing. Because the pension law passed in 2000 asserted that from the high point of the biggest stock market bubble in history, the New York State and New York City pensions funds would earn an additional 8.0% per year on average into the future, not the 7.0% that had previously been assumed. New York State and its local governments, and those throughout the country, had already cut the amount that was being contributed to the pension plans based on high stock prices, to levels below what my model finds would be required to pay for the pensions. So how accurate has that 8.0% rate of return assertion turned out to be, and what are the consequences?

Paterson steps up to “level the playing field.”

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What do three of the last four governors have in common?

Promises to increase opportunities for minority and women owned firms.

Well, here’s something that shocking and how could it exist in a liberal state like New York?

We already know that New York is one of the most ethnically diverse states:

-Has the second highest number of women-owned businesses

-And New York has the third highest number of minority-owned business enterprises

Yet the reality is at the end of the day, when it comes to spending money with such businesses, New York State currently falls behind eight other states.

Close Encounters of the Gulf Coast Kind

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Close Encounters of the Gulf Coast Kind

 

By Michael Boyajian

 

New York photographer Kevin Downs reporting from the Gulf Coast tells of  a surreal situation reminiscent of the frightening contamination of the alien landing area in the film, Close Encounters of the Third Kind.  Only this time it is not faked and it’s the greatest environmental catastrophe in history and it is the press that is being kept away from the horrid scenes of BP’s calamity.

So What Do Those Public Employee Pensions Cost Anyway?

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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.

Angry Teabaggers Look the Other Way at Local Taxes and Spending

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Angry Teabaggers Look the Other Way at Local Taxes and Spending

 

By Michael Boyajian

 

Some angry teabagger types have set up shop by the Fishkill post office with loud angry signs that call for the impeachment of President Obama because of among other things his spending.  Let’s not even bother to argue that President Bush was the original big spender with his bailout bill.  Let’s just look at what is going on under the nose of these protestors.

Taxes & Basketball

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As sure as death & taxes, one pedicatable result of the signing of LeBron James by the Miami Heat was an op-ed by a Manhattan Institute scholar in the NY Post making a claim about New York’s high taxes versus Florida not having any income tax.

The Gateway (Reshma to Judgement Edition)

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Congressional hopeful Reshma Saujani complains of "an all too familiar media distortion that favors process over policy, this piece is emblematic of a political culture that is failing to inform voters about the issues, " but the most damning things in the WAPO article she complains about were verbatim quotes of what she said; -so much for distortion.

And as for complaints of elevating process over the issues, which candidate is complaining about the other's PAC contributions (while taking bundles of non-PAC contributions from the same interest groups) and financial holdings, as opposed to her votes? My Views on Wall Street and Our Broken Political Process www.huffingtonpost.com

　

Either you have it or you don’t

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Just recently I had lunch with former Mayor Ed Koch, and I have to say it was a very pleasurable experience.

Some politicians just have “It.” Charisma, personality, charm, the ability to connect with people. Koch has always been one of them.

For 25 years, Koch and I have always had a traditional Newsmaker/Journalistic relationship. I’ve known him as the city’s personable and witty three term mayor, but this time over lunch was different. He was again literally standing as tall as he did when he was mayor. He’s a man in his 80’s, who has had heart problems, but on this day Koch was in his prime. Every weekend, he dines for the most part, with former members of his administration, and it was remarkable to watch Koch hold court without missing a beat. In all these years, I had never seen the private Ed Koch. But this time I did.

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