Lisa Chow is the economics reporter at WNYC. She tries to explore in her stories surprising aspects of New York’s many economies—in plain view or hidden, in neighborhoods or sectors.
City Comptroller Says Pension Costs Will Fall After 2016
Thursday, June 02, 2011
Contrary to a popular belief that public pension costs will eat up more and more of city spending, a report by New York City's Comptroller Office says pension costs will actually decline as a percentage of the city's budget starting in 2016.
"The costs will decrease significantly, specifically because in recent years, benefit reductions have already been implemented for new employees coming into the system," said City Comptroller John Liu.
Liu's report says because of changes to pension plans that took effect between 1995 and 2009, newer employees, particularly in the city's police and fire departments, won't receive the types of pensions offered to the older employees. He said pension costs, currently about 11 percent of the city's budget, will drop to 5 to 6 percent of the city's budget by 2040.
Liu attributed the high pension costs today, in part, to stock market losses. In the past decade, he said, the pension funds' assets have netted annual returns of 2.5 to 3 percent — much lower than the funds' 30-year average of 9.7 percent.
"It does mean that we still have a few difficult years ahead, but once we get past those investment losses experienced over the past few years, the pension costs will start to come down significantly," Liu said.
The office of Mayor Michael Bloomberg, who has been trying to negotiate reductions in pension benefits for future New York City employees, said the report had many inaccuracies.
"The report is riddled with flaws, like somehow assuming life-expectancy will not change," said Marc LaVorgna, a spokesman for Bloomberg. "The entire document is the functional equivalent of whistling a happy tune past the graveyard. We've got major problems – rosy scenarios aren't going to solve them."