Old-style pensions have gone out of style in most industries, and if the US auto industry goes through the restructuring that’s expected, then that may be in its final days, as well. But while industry has evolved — as it does — the public sector is still stuck in its legacy system.
After our post earlier on the lobbying from the pension industry, a reader passes along this 2006 study from the Manhattan Institute entitled Defusing New York’s Pension Bomb, which spells out the spiraling state contributions to the pension system. It advocates a personal accounts-type system with mandatory contributions from government.
Skyrocketing pension expenses have been a major factor in the fiscal stresses afflicting every level of government in New York State. From 2000 to 2005, statewide public pension contributions soared by more than $5.6 billion-and they are still climbing. In New York City alone, higher annual pension costs have consumed three-quarters of the new revenue generated by a record property tax rate increase and rising property assessments since Mayor Michael Bloomberg took office in 2002.
Today’s resurgent pension obligations represent a return to historical norms after an unprecedented period of declining costs during the 1990s. Significant recurring infusions of tax money will be needed to make good on New York State’s generous retirement promises to its public employees for many years to come.
Meanwhile, the state is putting the best face on things:
The New York State pension fund has fallen 20 per cent since April, but because only a portion of workers’ investments are in the fluctuating stock market, retirees will continue to get their benefits, said Comptroller Thomas DiNapoli.
The state’s Common Retirement Fund totaled $153.9 billion as of March 31, before the value decreased by almost $31 billion due to the stock market crisis.
“Like every investor, the fund has felt the impact of the global credit crisis,” DiNapoli said. “But the fund remains strong, and benefits to the more than 1 million retirees, beneficiaries and members are safe and secure.”
Of course, this is just one state, and it’s likely a story playing out all around the country. Can you hear the ticking?
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