News, views and commentary on Long Island, state and national politics.
ALBANY - State Comptroller Thomas DiNapoli said Friday he will lower the cost paid by governments and their taxpayers to fund public workers' pensions because of what he says is a strong return on past investments. But he also forecast a "tougher investment climate ahead."
"It's positive news from a taxpayer's perspective," DiNapoli said of lowering the employer costs of the state and local governments. "While modest, we believe it will provide some relief."
As the sole trustee of the massive public employee pension system, DiNapoli sets the costs that governments pay in employer contributions. Spikes in this major cost for state and local governments have in past years created deficits and forced tax and fee increases as well as cuts in services that aren't legally mandated like pension payments.
On Friday, DiNapoli said he will reduce that cost for 2016-17 by about 15 percent for most public employees' pension systems and by 2 percent for the Police and Fire Retirement System.
"For the third year in a row, there will be a decline in pension contribution rates as a result of solid investment returns," said the Great Neck Plaza Democrat.
He is also reducing the assumed rate of return on investments to 7 percent for the coming fiscal year, from 7.5 percent now. That's a reflection in part of the volatile stock market, in which DiNapoli invests much of the pension fund.
DiNapoli lowered the assumed rate of return only once before, in 2010. At that time, during the national recession, he lowered the rate to 7.5 percent from 8 percent.
DiNapoli is showing more prudence than his counterparts in most other states in forecasting future investment gains, but he could have gone further, said E.J. McMahon, president of the independent Empire Center for Public Policy, a fiscally conservative think tank.
"DiNapoli's fund is well funded and prudent compared to the vast majority of the public pension funds, but compared to private pension funds, it's grossly underfunded," McMahon said.
McMahon notes that DiNapoli lowered his assumed investment return to 7 percent, but that's still optimistic for a roiling stock market. McMahon said private-sector pension funds forecast investments returns between 4 percent and 5 percent.
But public pensions have the benefit of relying on a bailout with public funds, if it was ever necessary. "This is a classic step in the right direction," McMahon said, "but you're needlessly allowing more risk in the long term."