Mulgrew’s fingerprints are all over this spend now pay later scheme particulariy since no one has any idea of what the money will be used to pay for. And Mulgrew is up for re-election and having lost the Retired Teacher Chapter election to the opposition, he surely wants to come up with something big to look like a hero. The same hero who raided the Stabilization Fund of a billion dollars to pay for raises in 2014. The same dirt bag who has fought and lied for just about 4 years to take away 250,000 NYC public service retirees healthcare promised over the decades that they worked for NYC.
Note from my chart that in the first four years, the bulk of the budget savings/contribution deferral is in TRS. Mulgrew presumably will want to lay claim to that. Despite her claim of no state financial impact, it also reduces pressure on Hochul to fund class-size mandate via higher state aid than the generous (in light of falling enrollment) increase she has already proposed.
Tom Brown responded, somewhat hostilely, suggesting that bad information was out there. He said that no one was borrowing money from the pension system and that the piece of legislation was merely a correction or ‘smoothing out’ of previous actuarial estimates. He suggested that during a period of time, contributions were overstated, and that this move was about recuing volatility. It has no baring on pensions of current retirees or future retirees and has no bearing in calculations. He went on to discuss how the TRS had been around since 1917 and had never missed a payment, again, going on a bit of a sarcastic diatribe over bad information out there.
There’s a word to describe Brown’s reported response, and the word begins with “b.”
See the other graph in my post. NYCTRS is *not* overfunded. TRS is roughly 85% funded on an “actuarial” basis; as of FY 2024, the TRS net plan liability was $12 billion (see p 21 of city’s ACFR). The “amortization” scheme will reduce the funded ratio and make the liability larger through 2032. At that point, the big jump in required city contribution inevitably will put pressure on city to reduce the active TRS payroll.
Both retirees and taxpayers (who must guarantee the benefits, no matter what) should want a funded ratio of 100% and a net liability of zero.
By the way, look again at the main chart of projected contributions and tell me how that “smooths out” anything. Those numbers are from the legislation itself, the fiscal note.
With regard to Brown’s response, note the official explanation from Hochul’s office to the effect that the amortization is “an extension of the timeframe to fully account for unfunded obligations within the New York City pension system which were first recognized in 2010.” That, in itself, explains all you need to know to understand why this is a terrible idea—a tacit admission that they want to, in effect, refinance a loan by extending its term. Bad, bad, bad.
Nice article. Good to have this stuff publicized. Couple of things:
Re "the money saved by the city is most likely to be spent on salary increases": Note that increasing salaries increases pension benefits.
Also, respectfully, I cringe when I see "contributions" used interchangeably with "cost." "Cost" I think should be reserved for the economic value of pension benefits being earned. Deferring contributions does not reduce "cost" any more than making minimum payments on one's credit card.
Finally, the biggest problem with pension numbers generally is that liabilities are understated on the order of 20-40%. Ask any financial economist. The numbers you see, even in the public plan database, and any actuarial report, are a word starting with "b". The illusory truth effect is hard at work when it comes to pension liabilities. Discounting with a return target does not a "liability" make under any meaningful definition of the term. See, for example:
Mulgrew’s fingerprints are all over this spend now pay later scheme particulariy since no one has any idea of what the money will be used to pay for. And Mulgrew is up for re-election and having lost the Retired Teacher Chapter election to the opposition, he surely wants to come up with something big to look like a hero. The same hero who raided the Stabilization Fund of a billion dollars to pay for raises in 2014. The same dirt bag who has fought and lied for just about 4 years to take away 250,000 NYC public service retirees healthcare promised over the decades that they worked for NYC.
Note from my chart that in the first four years, the bulk of the budget savings/contribution deferral is in TRS. Mulgrew presumably will want to lay claim to that. Despite her claim of no state financial impact, it also reduces pressure on Hochul to fund class-size mandate via higher state aid than the generous (in light of falling enrollment) increase she has already proposed.
From yesterday’s UFT executive board meeting.
Tom Brown responded, somewhat hostilely, suggesting that bad information was out there. He said that no one was borrowing money from the pension system and that the piece of legislation was merely a correction or ‘smoothing out’ of previous actuarial estimates. He suggested that during a period of time, contributions were overstated, and that this move was about recuing volatility. It has no baring on pensions of current retirees or future retirees and has no bearing in calculations. He went on to discuss how the TRS had been around since 1917 and had never missed a payment, again, going on a bit of a sarcastic diatribe over bad information out there.
There’s a word to describe Brown’s reported response, and the word begins with “b.”
See the other graph in my post. NYCTRS is *not* overfunded. TRS is roughly 85% funded on an “actuarial” basis; as of FY 2024, the TRS net plan liability was $12 billion (see p 21 of city’s ACFR). The “amortization” scheme will reduce the funded ratio and make the liability larger through 2032. At that point, the big jump in required city contribution inevitably will put pressure on city to reduce the active TRS payroll.
Both retirees and taxpayers (who must guarantee the benefits, no matter what) should want a funded ratio of 100% and a net liability of zero.
By the way, look again at the main chart of projected contributions and tell me how that “smooths out” anything. Those numbers are from the legislation itself, the fiscal note.
And what’s your opinion on Mark Levine wanting to use pension funds to build affordable housing. I have a suspicion I know your reply…. 😁
See video at 5:10. It’s his interview on The Point with Marcia Kramer
https://m.youtube.com/watch?v=bsmcLF1H66M&pp=ygWLAU5ldyBZb3JrIENpdHkgY29tcHRyb2xsZXIgaG9wZWZ1bCBNYXJrIExldmluZSBzaXRzIGRvd24gd2l0aCBDQlMgTmV3cyBOZXcgWW9yaydzIE1hcmNpYSBLcmFtZXIgZm9yIGFuIGludGVydmlldyBvbiAiVGhlIFBvaW50LiIgRkVCIDksIDIwMjU%3D
Your suspicion is correct.
With regard to Brown’s response, note the official explanation from Hochul’s office to the effect that the amortization is “an extension of the timeframe to fully account for unfunded obligations within the New York City pension system which were first recognized in 2010.” That, in itself, explains all you need to know to understand why this is a terrible idea—a tacit admission that they want to, in effect, refinance a loan by extending its term. Bad, bad, bad.
Let’s see what Tom Brown of the @uft has to say that. 🙄. Maybe it’s the new math protocol he’s thinking about
Nice article. Good to have this stuff publicized. Couple of things:
Re "the money saved by the city is most likely to be spent on salary increases": Note that increasing salaries increases pension benefits.
Also, respectfully, I cringe when I see "contributions" used interchangeably with "cost." "Cost" I think should be reserved for the economic value of pension benefits being earned. Deferring contributions does not reduce "cost" any more than making minimum payments on one's credit card.
Finally, the biggest problem with pension numbers generally is that liabilities are understated on the order of 20-40%. Ask any financial economist. The numbers you see, even in the public plan database, and any actuarial report, are a word starting with "b". The illusory truth effect is hard at work when it comes to pension liabilities. Discounting with a return target does not a "liability" make under any meaningful definition of the term. See, for example:
https://manhattan.institute/article/bad-accounting-cant-make-public-pension-funding-shortfall-crisis-add-up?utm_source=press_release&utm_medium=email; or
https://larrypollack.substack.com/p/public-pensions-a-toolkit-to-help