Tag: Albany

So the Times has a two part series on collapsing public pensions in the business section today, with a debate on what to do about it. What the debate doesn't say is that all "solutions" discussed involve younger generations becoming worse off, as taxpayers (due to deferred costs that have to be paid for with interest later) and public employees (lower compensation relative to those who came before). And that even if the pay and pensions of future public employees is slashed, public services are going to be completely gutted for decades — particularly if inflation doesn't devalue what is owed. No matter what. Done deal. And, or course, the massive debts run up over the past two decades are on top of that.

Not content with gutting the schools to pay for teachers with seniority to retire at age 55 instead of 62 without contributing an extra dime under a 2008 deal, the UFT now demands that teachers be allowed to retire earlier. Age 50? Age 45? Needless to say, the UFT doesn't specify the age. They claim yet another early retirement "incentive" will save the city money. Previously, they had claimed that allowing teachers to retire seven years earlier under the 2008 deal, and providing retirement health care ten years before Medicare picked up some of the cost rather than three, would cost nothing. It was, and is, a lie.

The State Assembly is holding out for borrowing lots of money to cover over problems until after they are all re-elected. Just like in prior fiscal crises, with money that is never paid back. (In between fiscal crises, they borrow money to provide a sweet deal for their campaign contributors and those cashing in and moving out). They are holding out for something like the Ravitch Plan, under which the bonds themselves will contractually obligate future New Yorkers to pay ever higher taxes despite not receiving public services and benefits in order to pay back the debts, without borrowing more. People would be forced to pay taxes, and the bondholders would get the money first, with schools, health care, parks, roads, transit, police etc. paid for if any money was left. Actually bonds would be paid second, after pensions.

I’ve got news for them. The State Constitution says the tax revenues of the state can never be contracted away. And younger generations are under no obligations to pay. None. Even if they were under a legal obligation to pay, they are not under a moral obligation to pay. It’s time to stop talking about running up additional debts, and start talking about who has what obligation to pay the debts we already have. Start with the retired, who are currently exempted from state income taxes.

As we await final, detailed data from the 2007 Census of Governments, the U.S. Census Bureau has released pension system finance data for FY 2008. There is no need for me to keep endlessly repeating myself, so if you want a detailed look at New York’s pensions over time read this post, and compared with other parts of the country read this post, downloading the attached spreadsheet. I’ll go into even more detail when the 2007 finance data comes out.

I did do a couple of couple of calculations with the 2008 data, which are shown in the spreadsheet attached to this post. In addition to the points I made in the two posts above, which one ought to read if one hasn’t already, what jumps out at me about 2008? New York City pension plan payments drained 9.1% of their total assets that year, compared with a national average of 6.1%. These payments are for work done in the past, which was supposed to be paid for in the past, when taxpayers benefitted from the work. There is supposed to be enough money in the pension plans that if the City of New York disappeared, all vested benefits could be paid. New York’s public employees, however, spend 25 to 40 years in retirement on average, after working for just 20 to 25 years. And yet at the FY 2008 rate of drain, before the big financial hits in the fall of that year, its public employee pension plans were sinking so fast the money would be gone in just eleven years. Only Rhode Island, West Virginia and Connecticut were worse off. California and New Jersey, which have been and will be very much in the news on the pension issue, were better off.

While certain state politicians are demanding an audit of the MTA they defunded, I caught an interesting statistic in an article on the on the taxi overcharge scandal. According to the New York Times, New York City has 48,000 taxi drivers. That number rang a bell, and sure enough according to page VI-145/146 of the latest MTA budget, New York City Transit required 48,600 workers to transport a far larger number of people around New York City. Streetsblog, meanwhile, has drawn a striking comparison between the cost of having New York City Transit carry schoolchildren around the city, which New York State is unwilling to pay for, and having private school bus companies, which are big campaign contributors, do it, for which the state pays less for in New York City than in other parts of the state.

Meanwhile, I read that the state has been intensively auditing S.U.N.Y., finding the usual examples of services that could be consolidated and bookkeeping errors that need to be corrected. While I have no problem with holding S.U.N.Y. and C.U.N.Y. strictly to account, however, the reality is that staffing and pay are low in New York State in state government higher education (colleges and universities)  and in New York City in local government higher education (community colleges) relative to the national average, according to governments division data from the U.S. Census Bureau. Particularly when the higher cost of living downstate is accounted for in payroll. Meanwhile, elementary and secondary school spending, staffing and pay in the portion of New York State outside New York City is off the charts. It appears that the whole focus in a fiscal crisis in on the places where the money isn’t. Somehow, I don’t think that’s an accident.

So that's the answer. The generations in charge keep all the deals they have promised themselves but refused to pay for, and to put off the day of reckoning a while longer until they move out of die off, money will be borrowed. Again. With a promise of repayment backed by diminished public services and benefits, and higher taxes, for those still here in the future. Again. That is their legacy, a poisoned legacy in their communities, in their state, in their country, and in many cases in their families. "I want for me now," right to the end. "And I won't face the fact that I am acting to harm anyone else because I won't think of anyone else; just me, just right now." Consequences for others and the future therefore just appear, they rationalize to themselves.

I'll write more about this later, but just let me clear one thing up as a matter of fact.

So we have now had the usual circus of everyone showing up and yelling at the “unaccountable MTA.” Why isn’t there any similar circus at which people can yell at the New York State Legislature? After all, that is the group of people who sold out the future. Well, they created the MTA to take care of that for them. It’s what the MTA is for, to be held accountable for what others have done and they are expected to go along with.

So no one in power wants Governor Paterson to run for Governor. And no one in power wanted Tom Suozzi to run for Governor in 2006. And no one wants a primary challenge to Senator Gillibrand. Why? Because Governor and Senator are among the only contested elections in New York. Legislative and Congressional districts are gerrymandered, ballot access and other rules screen out non-insiders, incumbents get all the special interest money, and careerists wait for their turn to be appointed. And elections are not what people with excess privileges want, particularly as the cost of past deals and favors and the current crisis is shifted entirely to the vast majority of people, people who don’t matter. They are not to be given choices. Which is how many are driven to extreme choices.

I’m not sure I’d call Governor Paterson a hero for deciding the serfs of New York will have their public services gutted instead of having their nation-leading taxes raised, cutting the benefits only of future public employees, and directing most of the pain to New York City, while not demanding those with great deals — retired public employees, existing employees who do not work, and today’s seniors in general — give up anything. In fact, the state legislature would never allow anyone other than the serfs to be sacrificed anyway. But with the political class uniting around the next “one and only choice” presumably guaranteed to preserve all the deals and keep the vested interests vested, Paterson is like a cornered animal, and there is no telling what he might say.

Suddenly, and a decade too late, the press is buzzing with talk of state and local government bankruptcies.  State and local governments face a lost decade due to debts and retirement obligations, run up by privileged members of previous generations so they could have a better deal, according to the Wall Street Journal.  “Besides the near-term crisis, the other similarity states have with the old GM is an overhang of debt. Between 2000 and 2008, state debts—distinct from other municipal debts—almost doubled to about $1 trillion, according to the Census Bureau.” The burden of this debt has been masked by low interest rates, but these cannot be expected to continue. New York State, particularly New York City, is near the top in debts as a share of its residents's income.

“The bigger issue is retirement obligations. Like GM, many localities have struck generous deals with public-sector workers. In part, this reflected a desire to appease unions with promises for tomorrow that didn't have to be paid for until well after the next election. In a new study, the Pew Center on the States estimates there was a $1 trillion funding gap on $3.35 trillion of state health-care and retirement obligations as of fiscal year 2008.” The New York State pension system is among the least underfunded, although public services will have to be gutted to keep it that way. But the separate New York City pension system, and the MTA, are among the most underfunded.

It looks like the country of Greece is going bankrupt, possibly setting off the next leg of the ongoing debt crisis. They are somehow beating New York, New Jersey and even California to it. I wonder if borrowing for the infrastructure and facilities associated with the 2004 Olympics has anything to do with it? Given that New York is already one of the most indebted states and cities, relative to our residents' (falling) income, and are virtually broke as it is, I certainly am glad we aren't building similar facilities for 2012 right now. Even Vancouver, with the Winter Olympics a week or so away, is having regrets. The expectations and demands of the IOC, it seems, have been in a bubble as well.