Public Employee Press

NYC Comptroller Liu:
Wall street mess pushed up pension

BY GREGORY N. HEIRES

The city's rising pension obligations are caused more by poor investment performance than by the so-called bloated benefits that the Bloomberg administration likes to blame.

The city's pension expenditures rose from $1.2 billion in fiscal year 2001 to $7.7 billion in FY 2010. A recent study by City Comptroller John C. Liu found that poor investment returns were the largest single factor in the increase, accounting for 48 percent of the rising cost over the past decade - $15.2 billion.

"The data challenges widespread notions that overly generous benefits played the leading role in the escalation of city contributions," Deputy Comptroller Simcha Felder said. Liu's office released the 28-page report, "The $8 Billion Question: An Analysis of NYC Pension Costs Over the Past Decade," on April 6.

"The study clearly shows that the principal problems with the city pension systems result from the poor economy and implosion of the stock market rather than the underlying benefit structure," said Local 1320 President James Tucciarelli, who chairs the DC 37 Pension Committee.

"It's nice that the comptroller did a careful study, rather than shooting from the hip like the mayor," Tucciarelli said.

Bloomberg wants a poorer pension

Blaming pension and health-care costs for the city's rising budget expenses, Bloomberg issued a plan earlier this year to make future city employees pay more and work longer for smaller pensions.

"While pension reform is needed, radical changes to retirement benefits should not be made solely based on one of the worst decades in market performance," Liu said.

Bloomberg's "Chicken Little" attack on pensions mirrors what's happening around the country as conservative mayors and governors use budget problems caused by the recession and the 2008 stock market debacle to gut public employee benefits.

The media and the Bloomberg administration and its conservative allies play up pension abuses. But in fact, civilian retirees' pensions average $17,200 a year, and nonteaching school workers get an average of $13,600. (See page 6.)

After poor market performance, the Liu report found that the second-largest factor in rising pension expenses was benefit improvements, which accounted for 44 percent of the decade's cost increase. Legislation enacted in 2000 ended workers' contributions after 10 years and created a cost-of-living adjustment to reduce the effect of rising prices on retirees' fixed incomes.

While the Comptroller's study compares pension investments and benefits from 2000 to 2010, the Bloomberg administration focuses on the cost of the 2000 enhancements but measures investment performance since 1996. Including the stock market boom of the late 1990s cuts the share of the cost increase attributed to bad investments.

"As responsible labor leaders, we agree that the pension system needs to be looked at," Tucciarelli said. "But certainly we don't need the draconian changes sought by the mayor. The Comptroller's study shows that the financial health of our pension system reflects the ups and downs of the economy and Wall Street. The sky isn't falling."