Pensions: He Said He Said
From the Politicker: "'I don’t know where those numbers come from,' said Bloomberg, speaking on WOR 710 this morning. 'There’s no rational independent group that would say it.'...Deputy Comptroller Alan van Capelle fires back. 'Dollars to doughnuts this out of touch Mayor has not even read our report.”
That's probably true. But I have read the report. Among the many infuriating things in it, Table 2 on page 9 states in big type that the "normal" rates for contributions to (for example) the current NYC teacher's pension plan is 6.4% to 6.8%. That isn't so bad is it? On page 10 "if no further adjustments to pension benefits are made, other assumptions are accurate, and investment returns are equal to the assumed rate (in Chart 4, 8.0 percent), the gap between contributions as a percentage of salary and the entry-age normal rate will narrow." Well guess what. Presumably based on those same assumptions, in tiny print in a table on page 40 (but without a spreadsheet with all the parameters showing how this is calculated) we find that the total contribution would still be about 20% of salary in 2040. And 14.6% of salary -- double Liu's boldfaced rate -- in 2060.
Now think about what that means. The 2008 pension deal provided a retirement at age 55 after 25 years of work for current NYC teachers. So by 2060, not only would all the teachers now on the job be retired, but also the vast majority of their replacements would also be retired, and still the required pension contributions would be more than double what Liu wants us to believe the pensions cost are as a share of salary. All because of investment losses in 2008 and 2009, more than 50 years earlier?
And this assumes that years – decades – of even higher pension contributions and the related re-degradation of the city’s schools would leave it with the same number of teachers it has now, at higher wages. That same assumption is made for all public employees. In fact, the number of public employees working for the City of New York is lower than in 1990 (the number of retirees is much higher), and the city has repeatedly cut labor contracts with lower pay for future hires compared with those moving out. Etc. Etc. Etc.
While Liu's report does not provide links to spreadsheets with the calculations and all the data (including projected pension payments and the dollar value of returns), it does include a prominent letter from an actuary citing the accuracy of the data. For all we know, that actuary negotiated to put the 14.6% in 2060 in the back in exchange for getting paid and ignoring the less than 7.0% in the front, and anything in Liu's press release.
Such a deal, to preserve what integrity one can (but no more than is necessary), would be entirely consistent with what all the professional "truth tellers" -- accountants, executive pay consultants, actuaries, appraisers, bond raters, Comptrollers -- have done in the era of Generation Greed. Somehow come up with ways to show the executives deserve more pay and public employees approaching retirement deserve richer pensions, and this would not make anyone else worse off, in exchange for a fee.
So I don't believe Liu's report or his actuary, any more than I believe Bloomberg when he claims that allowing teachers to existing retire earlier in 2008 saved money and forcing future teachers to retire later would also save money. I'll write more about Liu's report latter. But for now, I suggest listening the Rush song "Show Me Don't Tell Me."
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