An examination of the looming pension crisis in New York State.
Executive Summary
This position paper examines the looming public pension catastrophe approaching our nation generally and New York State specifically. There are several key points we consider in detail:
- The coming public pension crisis is the largest financial problem our nation faces at the state level, and the cost to taxpayers will dwarf that from TARP, the Fannie Mae/Freddie Mac bailout, the S&L bailout or any other recent American financial crisis.
-- The magnitude and nature of the pension crisis is
disguised by the application of lax government accounting standards that allow for accounting deceptions and do not stand up to private sector scrutiny.
- An honest accounting of pension assets and liabilities would reveal a substantial underfunding in New York State's Common Retirement Fund of anywhere from $30 billion to $80 billion.
-- The pension borrowing legislation currently in place will further increase the level of underfunding.
- The Pension Fund's investment returns have been significantly below the median of other comparable public pension funds for the last year, the last two years, and the last three years and have thus further exacerbated New York's pension shortfall.
-- The Fund's cumulative underperformance, relative to its 8% target investment return over the past 3 years, totals nearly $50 billion.
- Pension promises to state and local government workers and retirees are guaranteed by law, legal precedent or, in some cases like New York, state constitutions. Ultimately, these shortfalls are borne by unsuspecting taxpayers who are on the hook for higher taxes.
- In dealing with New York's pension underfunding, the State and its leadership must adhere to three bedrock principles:
-- The true extent of our shortfall must be made clear through an honest accounting.
-- New Yorkers are already the most heavily taxed people in the nation and cannot afford additional taxes, so increased taxes cannot be a part of any solution.
-- The benefits of New York's government workers, retirees and their beneficiaries are to be provided for in full. They have earned these benefits as part of their negotiated compensation on the basis of a contract that must be honored.
While the pension crisis is national in scope, it affects each public fund individually, and we New Yorkers need to fix our own Pension Fund in order to save New York members, retirees, beneficiaries and taxpayers from this looming tax crisis. The New York State Comptroller, as the sole trustee of the State's Fund, should work with the Governor, the Legislature and all stakeholders within the framework of the principles above to develop long-term reforms that ease our Pension System back to solvency. But we cannot determine the full set of solutions that are available to New York until we first uncover the true magnitude of our own crisis. This white paper aims to uncover as much as can be determined through publicly-available sources--more data on return assumptions for the Pension Fund must be released to allow for more fulsome analysis and, more importantly, solutions.
Note: The full report is available on the campaign website: http://wilsonfornewyork.com/ and can be accessed here: http://wilsonfornewyork.com/white_papers
|
