One of the toughest problems staring at the next mayor of New York City is what to do about city pensions.
New York City today is nowhere near the kind of trouble Detroit is in. That city is bankrupt and no one knows how or even whether pensioners are going to be paid what they're owed. But New York City will be in exactly that kind of trouble if it keeps promising fat pensions for retiring workers but doesn't put up the money to pay for them.
Here's the problem in commonsense terms, without the numbing use of words like billion or trillion.
The city and its unions agreed on contracts that promised generous pensions and post-retirement health benefits to city workers: teachers, firefighters, police officers and others. To pay for those pensions, the city sets aside money in each year's budget. That money is invested and grows, and if everyone has done his or her job right, when a city worker retires there's a pile of money waiting big enough to pay the pension and some post-retirement health benefits till that worker dies.
But not all have been doing their jobs right.
The amount of money being put aside isn't enough to provide the future pensions workers are earning -- and expecting. The situation of New York State is even worse. For the past few years, the state has borrowed to pay the pension funds for those future pensions present workers are earning. And guess whom they borrowed from? From the pension funds themselves.
If you're gagging on that one, then you understand just how shortsighted that little maneuver is.
New York City's pension situation demands what in the financial world is called a workout. That's what you do when things get so far off the rails that no silver bullet, no immediate fix, can solve the problem, and you need a multiyear plan to work out of the mess one digestible bite at a time. We need a workout for the city pensions deficit.
What elements might go into such a workout? Everyone will have to give something. Options include higher payments by the city to cover past shortfalls; trimming health benefits for city workers already retired or who've yet to retire; shifting benefits for future employees from a promise of a fixed benefit to an amount that is purely the result of what the money invested earned; and asking present retirees to pay slightly more for their present benefits.
All these pieces wind up, in the inexorable logic of public finance, being paid for by some combination of taxpayers, present retirees and future retirees. So don't hold your breath to see if the candidates address this explosive problem during the campaign. And you can be equally sure that union leaders -- who ought to have an interest in a thoughtful solution, rather than driving their members right off a cliff, a la Detroit -- won't be seeking a public dialogue on this subject between now and Nov. 5.
So with this huge long-term problem staring us in the face -- and all the candidates focused 100 percent on saying the right things in the short term to win a primary in three weeks and a general election in two months -- what should we expect?
We should expect this: A serious candidate, who wants our trust and the votes of city taxpayers, should tell us we have to address this problem, and that he or she will appoint an independent commission to estimate roughly just how big the hole is and lay out the tough choices. That would be a serious first step.
Peter Goldmark, a former budget director of New York State and former publisher of the International Herald Tribune, headed the climate program at the Environmental Defense Fund.