For A Stable Retirement & Balanced Budget, Reform Pensions Now
As an elected official familiar with the future pension obligations in my state, as well as an experienced financial-services professional, I respectfully disagree with those who seek to minimize the looming crisis.
In his article, “Pensions Aren’t the Problem,” for example, Mr. Eli Lehrer argues that nationwide, pension-solvency concerns are not a significant issue - as some critics say, not serious enough to be considered in debates over how to balance state budgets.
New York’s defined-benefit pensions are among the most generous in the nation, however, and once granted, are guaranteed by the state constitution. Each year, the taxpayer share contributed to state and local pensions is increasing at an unsustainable rate. Our choices of “revenue-enhancers” will mean two things: job-killing taxation or sky-high-interest borrowing. Every level of state employment, from school districts to counties, has seen record contribution increases from government. Given the economic uncertainty ahead, our current beneficiaries are making stable retirement for future workers almost impossible.
We cannot endanger education and other essential services because funding is being put toward these excessively generous pension packages. A balanced budget consists of balanced investments, not a huge annual payout to the public sector at the expense of basic services for the rest of us.
Consider the staggering numbers: contributions from counties into the New York State and Local Employees Retirement System (NYSERS) stood at $71.8 million in 1999; by 2008 that number had jumped to $422.2 million. That is an increase of 488 percent in less than 10 years.
In addition, school districts saw their taxpayer-funded contributions leap from $24.2 million in 1999 to $276.9 million in 2008, an unsustainable 1,044 percent spike, all on the public’s tab. On average, the employer’s contribution rates for NYSERS, as a percentage of payroll, grew from 1.2 percent in 2002 and is projected to be 16.3 percent in 2012.
My message is simple: the ‘political class’ needs to lead by example now so that we may ensure future prosperity for all New Yorkers. A defined-contribution plan for the political class- all elected and non-civil-service appointees - will unify the interests of public servants and the overburdened taxpayer.
I believe it is imperative that we establish a defined-contribution plan similar to a 401 (k), which would freeze the current retirement tier for the political class. Public servants should start with this good-faith attempt at comprehensive, long-term cost-savings to reduce the unfunded liabilities that threaten to bankrupt New York in the next decade.
There are a number of issues that each state faces as part of its struggle to stay financially solvent – in fairness, too many for Mr. Lehrer to note in depth. Nevertheless, New York pensions remain a top issue for our short- and long-term fiscal outlooks. With cities, towns, and villages watching their state funding decrease while their pension obligations grow, it is little surprise we are seeing local programs cut or reduced.
It’s time for public officials to take responsibility for the skyrocketing costs of pensions and lead by example today.