What's one of the main contributors to New York City's impending collapse? Constitutionally protected state worker (union) pensions. In this column in today's New York Post, Mayor Michael Bloomberg offers his worthless solution: create a new pension tier.
Currently, there are four pension tiers in New York. Once you are a vested member of a tier, your promised benefits cannot be diminished in any manner, only increased. This proposed new tier would not meaningfully change terminal benefits, nor would it tie the benefits to any sort of market risk whatsoever. The new tier would simply require that state workers contribute a small portion of their income towards their pension benefits over the life of their employment, rather than for the first ten years only. The Mayor's proposal would increase the minimum age to receive benefits slightly.
Mayor Bloomberg's scheme is facially unsatisfactory. Mayor Bloomberg's plan continues state-sanctioned thievery and wealth redistribution from privately employed taxpayers to a perennially Albany-favored class, public worker unions.
It is oft said that the Constitution is not a suicide pact. [For an interesting discussion on the origin and attribution of this saying, see this.] The cliche is equally true whether the state or the federal Constitution is at issue. Here in New York, back during the New Deal, ostensibly well meaning legislators amended the state constitution to "protect" worker pensions. Now courts and legislators hold that state pension benefits may not be changed from what was promised workers, sometimes more than 70 years ago. As a result of these rulings, taxpayers are required to bear the entire market risk of the multi billion dollar state pension funds at the same time most taxpayers are watching their 401ks circle the bowl. State taxpayers are currently obligated by law to sacrifice themselves to preserve gold-plated, unsustainable pension benefits for a favored class. It's surely as big a suicide pact as 'Puter's ever seen.
A brave man, a true leader, would insist upon leveling the playing field between taxpayers and the unionized state workers. Mayor Bloomberg is not that man. Despite his billions, Mayor Bloomberg is terrified of taking on entrenched state worker unions. Man up, Mike. Lead the charge to get rid of the Constitutional protection for guaranteed pensions. Right now.
Legislators, governors, mayors, and politicians right on down to the local level use the state constitution as an excuse for doing nothing while their constituents suffer. That is, the politicians throw up their hands and wail that pension benefits are sacrosanct because they are constitutionally protected. Therefore, nothing is to be done, despite the fact that pension are draining the state coffers dry like 'Puter drains a fifth of vodka on a Saturday night. ['Puter doesn't have a drinking problem. He only drinks on days that end in "ay." -- ed.] The legislators' dirty little secret is that they can put constitutional protection of pension benefits up for a state-wide referendum, if they want. But the politicians' union masters will not permit it.
It would be dishonorable for 'Puter to attack Mayor Bloomberg's plan without putting forth a competing plan of his own. 'Puter's plan for a new, fairer New York State Retirement System is as follows.
1. Anyone currently retired continues to receive benefits according to the current rules.
2. Anyone eligible for retirement in the effective year of the change can immediately retire and receive the current benefits as well. This has the added benefit of weeding out workers hanging on to max out their benefits, freeing jobs for younger, less expensive employees.
3. Everyone else (including those who are eligible to immediately retire but choose not to do so) gets the pension benefits they would receive if they retired on the effective date of the replacement pension law.
4. Going forward, the state would make generous (negotiated) contributions to employees' 403(b) accounts on a paycheck by paycheck basis. Just like private sector workers. 'Puter has no problem if those payments are more generous than average for private sector workers. The ability of the state to shed unknown future risk is worth the trade off.
5. If New York is worried about its workers foolishly investing their 403(b)s, the state can retain the ability of the state pension funds (plural - in New York there are several) to select funds to which employees may direct contributions. Like state municipal bond funds.
'Puter's plan would permit state workers a fair and orderly transition to a defined contribution plan similar to that of most modern workers. It is fair to state workers, and fair to state taxpayers.
Mayor Bloomberg's proposal of ineffective half measures to combat the public pension cancer is cowardly and intellectually dishonest. To be fair to Mayor Bloomberg, he may be the least cowardly and intellectually dishonest politician in New York.
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