Larry Littlefield's blog
News broke yesterday that the doctor who helped hundreds of perfectly healthy LIRR employees retire with enriched disability benefits was sentenced to eight years in prison. "Ajemian, 63, had pleaded guilty to conspiracy and fraud charges as part of a massive $1 billion scam. Between the late 1990s and 2008, Ajemian recommended that more than 700 LIRR workers receive disability benefits — the vast majority of whom were perfectly healthy."
At one point virtually everyone at the LIRR was retiring with a disability pension, compared with just 25.0% of MetroNorth workers. Not just the line workers, but the managers too, were in on the scheme. Here is what makes it worse. Do you believe that grifter attitude toward the rest of us suddenly appeared just before retirement? Or does the LIRR have a grifter culture that affects the way it works from the first day on the job to the last day on the job? You may recall the reaction of those in the northern suburbs to a possible merger between MetroNorth, which just restored rail service very rapidly after an accident, and the LIRR -- no way! That grifter culture is killing off not only the LIRR but all of Long Island, and as the non-grifters move away to avoid paying for it, that burden will be shifted to other parts of the state.
I’ve downloaded the public employee pension data for FY 2011, and find that New York City is in the same situation. Which is no surprise, because it will probably be in that situation for years, perhaps decades. The city’s pension funds are in something close to a death spiral, with 13.8% of total assets paid out that year. The national average is 7.7%, the figure for the New York State pension funds, which also cover local government workers in the rest of the state, is 6.3%. The city has 1.30 workers to every retiree receiving benefits, compared with the U.S. average of 1.69 and the 1.57 for the state pension funds. That is one year paid for a permanent vacation in retirement for every one year, four months worked, on average. City taxpayers contributed $24,701 to the pension plan for each public employee in FY 2011, compared with the U.S. average of $6,622 and the average of $6,731 for the rest of the state.
The City Actuary has said that New York City is contributing $1 billion less per year to these pension funds than is needed by his own calculation, which will have to be made up later many times over. This is the City Actuary has been in office, and seems to have felt there was no problem, for the 20-plus years when one retroactive pension increase after another has passed, the city’s pension costs have soared, and taxes have been increased and services cut to pay for it. And it has already been announced that the city will have to contribute an extra half $billion a year from now, because the rate of return was below expectations a couple of years ago. But if one looks at the actual rate of return the city is likely to achieve, and how underfunded the pensions have become under the watch of City Actuary Robert North, two Comptrollers who are running for Mayor, and a former budget director who is running for Mayor, I would say that taxpayers ought to paying into the pension funds 100.0% of benefit payments out, to prevent a death spiral that would bankrupt the city. The actual figure in 2011 was 78.9%. The spreadsheet and additional commentary may be found on “Saying the Unsaid in New York.”
So as one state legislator after another is indicted, or revealed to have engaged in behavior that would be unacceptable in anyone I would call a friend, everyone is huffing and puffing. Let me clue you in on the reality. State legislators have no real power, but do not face real elections. Sheldon Silver and Dean Skelos have real power over your lives, but you don't get to vote in their elections. Those who are under indictment do. If Silver and Skelos want to keep their jobs, and engage in the big time (if technically legal) corruption, these men need to have the backs of their actual constituents, despite their small time (and sometimes illegal) corruption.
Since quite a few of the state legislators recently exposed have been Black, one Black state legislator had this to say. “Why are we allowing folk who’ve been in power longer–who are perhaps smarter and slicker, who are are more dangerous under those conditions and perhaps robbing far more–we leave them alone and we target these over here?”
That sort of says it all, doesn't it?
What would I say about Obamacare, compared with the health care finance problems I identified, and solutions I proposed, in early 2008 before President Obama was elected? (You can read my entire series on health care in the MS word document attached to this post). I would say that legislation makes reform possible, but it is not reform in itself. As I noted at the time, U.S. healthcare is mostly government financed, directly or indirectly, but with complicated flows of public money under a wide variety of deals, the distribution that money is horribly inequitable. The tie between government health insurance subsidies, via a tax break, and a particular place of employment is bad for workers, entrepreneurs, and the economy. The U.S. healthcare system is extremely expensive, and delivers poor value. From the point of view of consumer protection, it engages in abuses that would not be tolerated in any other industry.
While Obamacare will reduce some of the inequities, it left the most of the complex and inequitable U.S. healthcare finance system in place, and punted much of the responsibility for further progress to the states. Which is not a good thing if you have a corrupt and poorly run state. The only reason New York will have a state health insurance exchange, as mandated by the Obamacare legislation, is that Governor Cuomo somehow was able to get around our parasitic legislature and create one by fiat. Yet there are many abuses that a state could get rid of, if it were not controlled by a legislature whose MO was to allow abuses in exchange for campaign contributions. In a major development, the federal government shined a light on one just last week. I’ll talk about it, and how a more “progressive” (the early 1900s version, not the self-interest group politics of so-called NY “progressives” today) state might respond, on Saying the Unsaid In New York.
Crain’s New York Business reports that negotiations between the City of New York and the existing food wholesalers at Hunts Point are at an impasse. The existing wholesalers, on public land they receive for nothing, want new, modernized buildings for their operations. There was supposedly a deal for the city, state and federal governments to pay half for their new buildings, but now that deal has supposedly fallen through. “With tensions high, the market could rekindle talks with New Jersey, which had been wooing the vendors with tax breaks and other incentives—though, according to Mr. D'Arrigo, the co-op has not talked to Garden State officials in two years. Complicating the negotiations is the fact that last month the produce vendors sued the city, naming as a defendant the Business Integrity Commission, a law-enforcement agency that regulates public food markets and haulers and carters, among other industries.”
I guess members of the general public have no leverage here. We’ll just have to pay more in taxes, and accept less in public services, to give them whatever subsidies they want, and then pay up because any competing food wholesalers seeking to enter the market would not benefit from those subsidies. Mayor Bloomberg would probably give away the store to seal a deal his successor would have to pay for, but the successor would be under even more pressure to show that he or she is not “against the middle class” by losing blue collar jobs. So those not in on any of these deals, I suppose, will have to accept being worse and worse off. Just as when the rich who sit on each other’s corporate boards enrich each other’s pay packages, then demanded a federal bailout when their house of cards collapses. Just as when the federal government had no choice but to run up the debt to prevent that collapse, but now those debts will force those age 55 and younger to lose federal old age benefits. Just as when the politicians and public employee unions cut deals to enrich their pensions, and then demand even more in taxes or service cuts to pay for it. Just as the Yankees demanded their empty parking garage or they would move to New Jersey, and rich threaten to leave town when taxes rise. They’ve got us. They’ve got our children. If you aren’t in the room, you are the victim, and we aren’t in the room. Does it have to be so? I’ll discuss further on “Saying the Unsaid in New York.”
I normally don’t comment on topical, symbolic issues like this, preferring instead to write about issues that I myself raise, issues that I know more about. And I’ve pretty much given up writing about solutions, because I have come to realize that solutions based on my assumptions – that everyone has equal value and the future and those who will live in it matter, for example – are not what politicians are looking for. And yet so much nonsense is being tossed around on the subject of “stop and frisk” that I feel compelled to comment, because those throwing the nonsense are in effect pretending that their pandering is cost free and will not result in losses elsewhere. This is the usual free political free shot – pander to one constituency, and blame any responsible suckers for the associated consequences.
Several facts need to be considered. According to the Statistical Abstract of the United States, New York City’s overall crime rate, once well above the U.S. average, is now well below U.S. average, although the city remains above average in the one crime that it seems to specialize in – robbery. In March 2002, according the U.S. Census Bureau, the number of New York City police officers was 2.9 times the U.S. average relative to population, and in FY 2011 it was still 2.81 times the U.S. average. In 2010, according to the 2012 financial report of the New York City Police Pension fund, there were 34,600 active members working, earning an average of $100,127. And 44,630 retired members, receiving an average of $40,200, free of state and local income taxes, with automatic increases each year. In the January 2006 Financial Plan from the NYC Office of Management and Budget, FY 2006 judgments and claims against the NYPD were projected to total $101 million. In the February 2013 Financial Plan, the estimate for this fiscal year is $180 million. I’ll discuss these facts and others at “Saying the Unsaid in New York.”
One of the ironies of recent history is that although politicians from the rest of the New York State routinely accused New York City of draining their communities through wasteful government spending and a welfare culture, a charge dating back to the administration of Mayor Lindsay and the annual tin cup pilgrimage to Albany, the reality has been nearly the reverse. During the Pataki Administration and after, in fact, local government employment in the rest of the state soared. Even as the independent economic base of Upstate New York, Long Island and the Lower Hudson Valley – in manufacturing, corporate headquarters and high tech companies such as IBM and Grumman, withered away. During the darkest days of the New York City economy, someone like Bella Abzug might have suggested making up for lost private sector jobs by just giving people more government jobs, so they could have unlimited health insurance and early retirement pensions, and making someone else pay for it. But the rest of New York State has seemingly tried to actually pull that off, burdening the remaining private sector employers there, New York City, and – through debts and deferred pension costs – the future. This trend was relentless and seemed to go on and on regardless of economic cycles.
Starting in 2009, however, it shuddered to a halt and began to reverse. Have the policies of Governor Andrew Cuomo stopped the trend? Has the burden on the private sector in the rest of the state reached breaking point? Or have the costs from the past finally caught up with the local government growth machine? You can review the data on "Saying the Unsaid in New York."
A back of the envelope comparison between the average income of those living in metro New York and the average price of existing houses that sell here shows the standard of living is quite low. Housing prices soared during the housing bubble, and didn’t fall back to normal in the New York area to the extent they did in most of the U.S. Unregulated rents are up. Those who purchased houses years ago at lower prices, or have lived for years in rent regulated or subsidized housing, are less affected. But for young people looking to move out on their own, and for people seeking to come here from elsewhere in the U.S. and all over the world, the personal standard of living is relatively low by U.S. standards, and going down. That is the bad news.
And, according to one theory, the good news. Because people keep coming here anyway, and something must be drawing them, something that offsets, for the moment, that low personal standard of living. A full discussion of this, with a couple of spreadsheets, may be found on Saying the Unsaid in New York.
Compared with the U.S. average, the gap has started to close, and because poverty is far grayer in the city than the U.S. as a whole, that gap may close some more. For now, read more and grab some spreadsheets here. http://larrylittlefield.wordpress.com/
It seems I can get posts here after all. Anyway, my series examining the extent to which New York City has recovered from the 1970s continues over at Saying the Unsaid in New York. I'll repost here once the new Room Eight, with attachment capabilities, is operating.
I have also been posting elsewhere while the old Room Eight has been in a coma. I expect to continue doing so during this temporary resurrection, as the new Room Eight is expected to have its spreadsheet attachment function restored. More recently, I've been posting a series on the extent to which New York City has recovered from the 1970s. The latest installment was posted this morning. You can read it and download the spreadsheet to see the charts here.
Since the financial crisis morphed into the Great Recession in 2008, Americans have been told to pay more for government, accept less, or both. That has been true in New York City as well, with ongoing service cuts in every budget despite a 7.0% property tax increase, a state income tax increase, and a new MTA tax on all workers (but not the retired or investment income). Along with fare increases, toll increases, and other increases. The recession, as officially measured, is long over, and New York City’s private employment is not only higher than it had been before the recession started, but also probably reached a historic high in 2012, finally surpassing the level of 1969. And yet New Yorkers are still being told to accept less and/or pay more to the government. This post and those after are about the reasons why.
As anyone reading this is aware, Room Eight has had periodic technical difficulties recently. So for Christmas my older daughter set up an alternate blog for me to use if I wish. So from now on what I post, or try to post, on Room Eight I will also post on the alternate site, in the hope that it will actually be available somewhere. The alternate blog is called “Saying the Unsaid in New York.”
The new site has two advantages. First, the “attachment” function still works, so it will be easier for me to provide spreadsheets with data for the reader’s use. You just click on the link right in the text to download. Second in addition to the ongoing blog, the site allows the creation of “pages” for information that I want people to have access to all the time. In addition to “About” I have created two of them. The “Helpful Background and Greatest Hits” page contains a series MS Word files with posts or series of posts with my basic worldview, the most all-encompassing “foundation” essays I have written. And “The Latest Public Finance Spreadsheets” page contains just that, always available with Background essays on where the data comes from and how I compiled it in MS Word format, the spreadsheets themselves, and MS Word documents with my analyses of them. Much of this was written for and still is on Room Eight.
You think that Bloomberg might be different. That Spitzer might be different. That Andrew Cuomo might be different. But in the end they do the same things. The Governor proposes to drastically underfund the state pension funds, which also cover local government (and school) employees in the rest of New York State, and make up the money later. Comptroller DiNapoli had pushed through a proposal to do the same a few years ago, but the higher payments from that deal are now due. Now Cuomo wants to pay for yesterday's pensions over up to 45 years, with disaster if optimistic assumptions do not come true. For reality, read the comments from outraged taxpayers and public employees, not just the article.
I guess the kind of tax burden we have, and declining quality of services we have, in New York City (for the second time) is not acceptable in the rest of the state.
New York's pension rules automatically allow the taxpayer contributions that are theoretically required today to be put off until tomorrow, through "smoothing." That makes it easier to, among other things, retroactively enhance pensions while deferring the costs until they could be blamed on something else. But that wasn't enough for State Comptroller Thomas DiNapoli, who proposed that the pension contributions by the State of New York and local governments outside New York City be re-smoothed – by borrowing money from the pension funds to defer costs until the stock market went back up. Then-Governor Paterson and the State Legislature readily agreed back in 2010. Well, the stock market went back up and now it’s time to pay back the pension funds under the DiNapoli deal, but guess what? No one wants to do that. So now-Governor Andrew Cuomo has proposed re- re-smoothing by having school districts borrow against the pension funds yet again. This will be counted as state school aid.