In a column published back In February titled “A man is only as good as his word,” I chided Governor Cuomo for not releasing the findings of the Spending and Government Efficiency (SAGE) Commission report in a timely fashion. I also wrote, with spending and debt in mind, “We’re back to square one with insolvency lurking in the shadowy corners of state affairs.”
This column examines yet another concern. As documented in a report issued by the Manhattan Center for Public Policy, New York’s Public Pension System is also inadequately funded to the extent of some $120 billion, a real concern for 1.2 million active members and 700,000 retirees and benefices and, of course, the taxpaying public. Why? In simplest terms, rate of return expectations are unrealistic for reasons beyond the scope of this particular column, “Bud Light” actuarial standards that are less stringent than those used in the private-sector and out of control, extremely costly, six-digit defined benefit pension payouts.
These problems are not unique to New York. Nationwide, unfunded liabilities are straining even the most well-balanced budgets, especially on the city or municipal level. How serious! The Mayor of the City of Providence, Rhode Island, announced his city was out of money and on the verge of bankruptcy. The Mayor of Buffalo made a request that the management of his city’s fiscal affairs be turned over to an oversight board.
Is any of this appalling mess correctable? Possibly! The Manhattan Institute Center for State and Local Leadership just released a report, “Fixing the Public Sectors Pension Problem: The (True) Path to Long-Term Reform,” with some well-thought suggestions, including but not limited to:
Changes that would place all public workers in defined-contribution plans with investment risk borne by plan members, not the taxpayers.
The modification of early retirement provisions.
The elimination of cost-of-living adjustments and,
Increasing the financial contributions that workers make to the plan.
It is interesting to note that many of these suggestions have been implemented in Providence, gaining the approval of almost 90 percent of the city’s police force and 70 percent of its firefighters. Over $178 million saved. The Little Engine that Could!
The course we are on today is not sustainable. It’s hardly the time to sit back and do nothing! I hope you agree.