The Missing NY Pension Issue

    Readers of this blog know that I've been quite positive about the pension reporting that usually is done by Mary Williams Walsh of The New York Times. Today, she has a lead front-page article (co-authored with Michael Cooper) with the scary headline "City Gets Sobering Look At Possible Pension Trouble." The upshot of the article is this:

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.

The chief actuary, Robert C. North, has prepared a little-noticed set of alternative calculations showing that the gap in the pension funds could be as wide as $49 billion. That is nearly the size of the city’s entire annual budget and the equivalent of the city’s publicly disclosed outstanding debt.

    I'm not going to focus too much on the quibbling between North's number and the denials that city officials have issued about North's contention. What's more interesting is the frame in which the article is written.

    First, check this out:

On their face, New York City’s pensions do not look particularly extravagant. As an example, a teacher retiring at age 55, after 30 years of service, could expect to receive a pension of about $51,000 a year today. The New York City police, who are compensated extra for the risks they face on the job, can retire after 20 years, at any age, with pensions of about $53,000 a year.

But compared with that of other workers — particularly in the private sector, where large companies have been freezing their pension plans and offering workers leaner benefits — the pensions are already relatively generous and becoming more so.

    That's where we have sunk in America--when someone receives a pension of $53,000n and that is seen as relatively generous we know how bad retirement security has become for the vast majority of workers. 53K? How can that be seen as "generous?"

    And then there is the observation by the writers that:

In addition to the pensions, New York City has promised to pay for its retirees’ health care. The total cost of those obligations has not been tallied or reported yet, but Mayor Michael R. Bloomberg has estimated it at about $50 billion in today’s dollars. (New York and other cities are adding up such obligations in response to a new accounting requirement.)

So, with the health care and the potential pension shortfall, New York City could have as much as $100 billion in long-term obligations that it has never formally reported.

    A perfect place to insert the idea of single-payer health care which would be a huge cost savings to cities across the nation, not to mention employers who are carrying the health care coverage of workers.

    And, finally, one reason cities and states are having such a tough time financially is the perversion of the tax system--i.e., the fact that the rich and corporations no longer pay a fair share of state and local taxes means that the revenue gap just gets bigger, with the burden to fill it--or the burden of the cuts that might be necessary in the future--increasingly being shouldered by average wage earners. That point never makes the article.

Comments

[Brennan Griffin]

Ok, I'm on board for union issues. I'm progressive as all get out. I work for an organization that fights for higher minimum wages, affordable housing, etc (ACORN- www.chieforganizer.org). But, I have to say that $53,000, retiring after 20 years, sounds just fine to me. Generous even. Maybe I suffer from low expectations, though.

I think we have to be a little careful about the terms of debate - if we define the standard too high, it just starts to look silly to everyone else. Since most Americans probably don't make $53,000 a year at their highest paid during their lifetime, I don't see how we can define $53,000 as too low without looking out of touch.

This is not an attack on the unions that negotiated those pensions - its an accolade - I think they did a good job to negotiate for those $s, and those workers deserve them. Lets just not set the bar unattainably high just yet, though.

[anon]

yeah. sadly, 50+k seems pretty generous to me too. i work at a hotel and out of roughly 300 workers there's probably no more than a dozen people who make at least that much in a year. the vast majority of my coworkers make far less than 50k.

that said, i come from an upper-middle-class family in the top 3% (household income over 200k) and we're pretty well off but by no means really wealthy, what with the cost of housing, college tuition, cars, and my parents' consumeristic urge to compare themselves to those who make even more money.

so i understand that while 50k seems like a whole lot to a lot of people, it's really just enough for an entry-level "middle class" living. we shouldn't be afraid to set the bar this high if we want to create a new middle class in America.

however, to do this without seeming out of touch, we need to make sure we define the enemy. those making 50k, 100k, 200k, and even 300k are not the enemy, even though they're often fooled into thinking like Republicans.

the real enemy are the superwealthy who own millions and billions and make the most of their money through UNearned incomes (inheritance, dividends, capital gains, interest, etc.). conveniantly, these are also the folks who pay the smallest tax rates compared to the rest of us who have to work for a living, whether we make 20k or 200k.

there's plenty of wealth out there to ensure that all workers receive a fair middle-class salary for their labor. the problem is that it's all being redistributed to the superwealthy who don't have to work for it. so there's plenty of money available for the pension funds, we just need to tax unearned incomes like we used to.

Whether your family makes $30,000 or $300,000 a year, you are being robbed because the IRS and other institutions have been systematically corrupted—under both Republican and Democratic administrations—to serve the needs of people who make millions.
-David Cay Johnston, Perfectly Legal

[D Flinchum]

anon, I don't take issue with what you say but it is very important to look at salary as well. I have already mentioned "The Height of Inequality" by Clive Crook in September's "The Atlantic". From this article come these facts:

Between 1966 & 2001, median wage & salary income increased by 11% after inflation. Income in the top 10% of salaries increased 58% after inflation. Income in the top 1% of salaries increased 121% after inflation. Income in the top .1% of salaries increased 236% after inflation. Income in the top .01% of salaries increased 617% after inflation. This last group represents about 13,000 workers in the country. This is NOT investment income; it is wages & salaries.

[anon]

good point. thanks for the info. CEO salaries are freakin' ridiculous.

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