By Henry J. Stern
August 24, 2006
Year after year, the New York State Legislature passes bills
which increase pensions and enhance retirement benefits for employees of
the City of New York. Although these laws mandate substantial
additional expenditures by the City, the State makes no contribution to their
cost.
While unions and actuaries dispute the impact of particular pension sweeteners,
there is no question that the added cost, now in the mid eight figures annually,
will increase each year as more people retire and more bills are passed.
The cumulative cost of Albany's largesse will reach the ten figure mark ($1,000,000,000)
within the foreseeable future, all to be billed to local taxpayers.
These pension bills are the biggest financial blow the state has dealt
the city since the Assembly repealed the commuter income tax on May 17, 1999.
That blunder has already cost the city about three billion dollars, and the
loss mounts with prosperity and inflation each year. As luck would
have it, the same person is responsible for both events, although some of
the blame should be shared by the sheep.
Occasionally Governor Pataki signs these bills, and sometimes he vetoes them.
His veto will be overridden if two men, the Speaker of the Assembly and the
Majority Leader of the Senate decide to do so.
All the pension sweeteners are passed at the request of public employee unions,
who are the largest political contributors in Albany. Bipartisan
in their self interest, the unions support incumbents in both parties.
Along with other lobbyists, they consistently buy tickets to Albany fundraisers
regularly held by candidates, most of whom are assured of re-election who
face little or no opposition. And the bills provide benefits which
the unions were unable to receive through the collective bargaining process
with the city.
Sadly, this condition is not new, nor is it news for us to describe it to
you. It has been documented exhaustively over the years, most recently
in the last two weeks in a series of front page articles in The New York
Times, under the title "Costly Promises." The series began on August
8, when Mary Williams Walsh discussed the problem of under-funded public
pension systems throughout the country. Her article, headlined, PUBLIC
PENSION PLANS FACE BILLIONS IN SHORTAGES, points out that many pension funds
will be unable to pay retirees what they are owed unless they impose substantial
tax increases, or incur additional debt. This is because some states,
counties and municipalities have not set aside sufficient funds to meet their
obligations. There is no central government regulation of these plans,
as there is with corporate pension plans in private industry.
On August 20, the Times' series turned to New York. An article by Mary
Williams Walsh and Michael Cooper leads with this explanation of the problem:
"Every year since 1999, New York City has reported that it has all the money
it needs to pay for the pensions that have been promised to city workers.
"With the retirement plans said to be financially sound, state politicians
have happily showered city employees with generous pension enhancements --
annual cost-of-living increases, holiday bonus payments, early retirement
with full benefits -- that are the envy of private sector workers, whose
pension benefits have eroded.
"But a close inspection of city pension records shows that the funds committed
to the plans may fall well short of the city's promises to hundreds of thousands
of current and retired workers. They look fully funded chiefly because
the city has been using an unusual pension calculation that does not comply
with accepted government accounting rules. Even the city's chief actuary,
who helps produce the annual reports, says the official numbers are 'meaningless'
when it comes to showing the plans' financial health." ...
"Pensions are now one of the city's fastest-growing expenses. In recent
years the city's required contributions to its pension funds have more than
quadrupled, to $4.7 billion this year from $1.1 billion in 2001.
Two years from now, the city expects to spend one out of ten dollars in its
budget on pension contributions."
Tuesday's article, by Michael Cooper, discussed the politics of pensions.
Again starting on A1, and headed RETIREES GET ALBANY ATTENTION, AND NEW YORK
CITY GETS THE BILL. The first example Cooper cites is the
sanitation workers: "It began with a simple plea for equity, for the same
deal that other unions had.
It ended with thousands of former New York City employees getting expensive
Christmas presents: bonus checks in each year of retirement that would eventually
reach $12,000, all paid for by taxpayers."
When the city denied these requests in contract negotiations, “the union
turned to Albany. It endorsed Gov. George E. Pataki's 1998 re-election
bid and gave state lawmakers and political parties $79,000 in campaign donations
in 1999. Then, after more lobbying and contributions, it persuaded
the City Council to ask the state to pass the bill." At that time,
the Council Speaker Peter F. Vallone, the Democrat the union had rejected
when it supported Pataki's re-election the year before. No hard feelings
there.
The Times continues: "That year a bill establishing the annual bonuses sailed
through the Legislature. The Giuliani administration, disturbed
about the city's being stuck with the cost, howled in protest, and both the
city and state comptrollers and the governor's own budget division recommended
a veto. But the governor signed the bill."
We here cite the interrogatory Rule 10: "I wonder why?"
The Times has a two column sidebar that goes from the top to the bottom on
page B6. It is titled: A DECADE OF PENSION SWEETENERS, and provides
chapter and verse of state legislation over ten years that enhanced pensions
at city expense. It can be argued that these higher pensions
will enable the city in the future to attract more qualified employees and
thus upgrade the public service. If you believe that, I have a bridge....
In Wednesday’s Times, on B3, Michael Cooper follows up with CANDIDATAES OPPOSE
FORCED PENSION INCREASES. The paper spoke to the leading candidate
and two of his meritorious rivals:
A Spitzer spokeswoman said: "Eliot opposes legislative changes to pension
benefits that were not agreed to in collective bargaining and did not receive
support for local governments that are obligated to pay the benefits."
Tom Suozzi said directly, "I'd veto every one of them put on my desk."
He added: "During the dark winter days of the legislative session, lobbyists
slither around the hallways garnering more benefits for their clients.
This forces local governments -- that have no say whatsoever in [awarding]
the benefits -- to cause their property taxes to go up."
John Faso, the Republican-Conservative candidate, had a more difficult time
with the question because, "As an assemblyman, [he had] supported a couple
of the most expensive pension enhancements of the last decade...[He] said
that he still supported the idea of providing automatic annual cost-of-living
increases for retirees, because many of the older retirees had seen the purchasing
power of their benefits eroded by inflation. But he said he had 'second
thoughts' about another bill he voted for, which allowed many workers to
stop contributing to their pension plans after 10 years."
The article did not cover the views of Assembly Speaker Sheldon Silver and
Senate Leader Joseph Bruno, who at this time are the state officials who,
through subordinate elected officials, have the most influence over pension
legislation in Albany. We will learn in 2007 how these titans (assuming
Bruno survives) get along with the new governor. There is an age difference,
which is an arithmetic progression: Spitzer is 47, Silver 62 and Bruno 77.
The Times expressed its indignation in today's editorial: PENSION GIVEAWAY.
We quote: "Urban park rangers and 911 operators can now retire with full
pensions after 25 years on the job, even if they're still in their 40's.
Correction officers, emergency medical technicians, sanitation workers, firefighters
and police officers who come down with heart disease can retire with pensions
equal to three-quarters of their salary, exempt from state and local taxes.
Ditto when correction officers, police officers and firefighters contract
hepatitis, tuberculosis or H.I.V. Meanwhile the city's pension plans
may be facing a shortfall of up to $49 billion."
The sordid situation of the state's craven elected officials in both parties
catering to politically powerful public employee unions and unilaterally
imposing hundreds of millions of dollars of pension obligations on city taxpayers
is contemptible. But how can we expect any more from a legislature
whose members are largely bovines and whose leaders are foxes who exploit
their public offices for substantial personal economic advantage for themselves
and their relatives.
It is these officials, responsible for enacting laws and protecting the public,
who instead use their power to secure themselves against competition, impede
ballot access, gerrymander districts, spend millions of taxpayer dollars
mailing pictures of themselves to their constituencies, hide member items
in what is surely illegal secrecy, and kowtow to the lobbyists who for many
years have kept them in food and drink, so they need not dip into their $140
allowance for every day the legislature is in session, ($244 a day when they
do business in pricey New York City), added to the $9,000 - 41,000 they receive
for committee assignments or leadership positions, added to their base salaries
of $79,500 (which they vigorously demand be increased); added to the undisclosed
outside income they receive from law practice (no matter how active or inactive
they may be), or from real estate, business income (no matter whether they
actually work); added to whatever expenses can be paid for by their campaign
funds. That was a long sentence, but it takes many words to describe
the income they receive legitimately.
It should be made clear, however, that these officials are not evil people.
They have constructed a system to make themselves impregnable. Their
elected courtiers dance attendance on them for fear of isolation and irrelevance.
But they are not fanatics, not violent and they can be reasonable if they
care to be. They are, however, more suited to operating a Middle East
bazaar than the New York State Legislature, even if it is "the most dysfunctional
in the nation," as the Brennan Commission report has found
The question of what, if anything, can be done about the open sewer close
to where the Mohawk meets the Hudson is the primary local political issue
which faces us today. We will discuss remedies in another article.
We invite all those with suggestions as to how to bell the cat to send them
to us for publication, with whatever attribution you prefer.
The Times' series was excellent. The News, Post and Sun have made the
same points on pensions editorially. Robert Bartley, late editor of the Wall
Street Journal, once said it took 78 editorials to get a bill passed. One
thing that is clear is that we have a long way to go in the effort to get
legislators to act in the public interest rather than assiduously serving
their own personal interests, whether political, economic, or as is most
likely, both.