Editorial: Myths distort pension-reform bid
Gov. Andrew Cuomo speaks to the New York Conference of Mayors in Albany. Cuomo wants mayors to pressue their senators and Assembly members to vote for his cheaper pension plan for future workers over the opposition of public employee unions. (Feb. 27, 2012) Credit: AP
In the political warfare that's broken out over Gov. Andrew M. Cuomo's proposed pension reforms, facts have been among the earliest casualties. So let's take a moment to blow up some of the mistaken impressions that have sprung up on the battlefield.
First, there's the false idea that public employees would have their benefits diminished. Nothing could be further from the truth. In fact the proposed reforms would have absolutely no effect whatsoever on people who already work for state or local government. That's none, zip, nada. Only new hires would be affected. Repeat: only new hires!
Second, it's absurd to suggest the proposed reforms, which would reduce the generosity of pensions for future employees and offer them a 401(k)-style choice, represent war on the middle class. On the contrary, they come closer to a rescue package for middle-class taxpayers, who cannot continue to support the soaring cost of benefits for public workers while saving for their own retirements and paying ever more for their health insurance.
In Suffolk County, for instance, where a panel of experts has just revealed a gaping budget hole, pension costs are expected to rise $90 million by 2013. At that point, pension obligations will account for more than half the county's projected deficit.
Private sector workers, meanwhile, increasingly must rely on the sort of 401(k)-style "defined contribution" plan that Cuomo proposes to offer to future public employees.
Third, there's the suspiciously timed allegation, by a group of lawmakers known as the Independent Democratic Conference, that the state's main pension fund is throwing money around Wall Street like the proverbial drunken sailor, even while fund performance is sagging. State Comptroller Thomas P. DiNapoli runs the fund -- and happens to oppose Cuomo's proposed reforms.
If the comptroller really were showering Wall Street with unwarranted fees, that would be an argument for precisely the kind of self-directed retirement program the governor is advocating as a choice for -- repeat after us -- new employees.
But the allegations are dubious. Every pension fund has investment costs. New York's are well within norms for large public funds, and vary according to its mix of investments and investment returns. Lower fees, of course, would be welcome. New York's appear to have increased sharply in recent years, but this is at least partly due to reforms at the comptroller's office, which breaks out the fees more transparently than was done under DiNapoli's predecessor, Alan G. Hevesi, who pleaded guilty to official misconduct in a pension-investment scandal.
All that said, it's unfortunate DiNapoli doesn't support Cuomo's sensible proposed reforms. Giving future public workers a 401(k)-style option hardly condemns them to spending their twilight years in serfdom. If all public employees eventually had such a plan -- which they won't -- it might be harder for future legislators to sneak through the kind of costly pension sweeteners that flourish in every Albany legislative session as politicians curry favor with their union backers. A better idea would be to put taxpayers first, which the governor's proposed reforms would do.
