Public pension costs for the city of New York skyrocketed over the last decade from $1.4 billion in fiscal year 2002 to $8.05 billion in fiscal year 2013, leading Mayor Michael Bloomberg to warn residents that a crisis like Detroit’s bankruptcy could also occur here in the Empire State.
As part of a new reporting project, MetroFocus and our colleagues at “The Pension Peril” will be examining public pension policy throughout the region and what shortfalls may mean for governments, workers, retirees and taxpayers.
In August 2013, Mayor Bloomberg said the increase in annual public pension costs was not driven by poor market return. “It was the result of a benefit structure that promises retirees too much too soon, and requires them to contribute too little to pay for it,” Bloomberg said.
“We’re not on the road to Detroit, in that we’re not going bankrupt anytime soon,” Gelinas said. “The problem is if we don’t think about this as a serious issue, it’s something that could happen five years, 10 years, even longer down the road.”
Parrott suggested that de Blasio change the way the city manages the pension fund. “Right now, it uses a lot of outside pension fund managers, they cost the city a lot of money,” he said.
Gelinas called for greater reforms at the state level where public pension policy is made. “In the long term, we’ve got to raise the retirement age, we’ve got to ask city workers to pay more for their own pensions,” she said. “[W]e’ve got to think about how long should a person expect to work.”
Bloomberg also warned that market forces would not be enough to alter pension funding problems. “Avoiding the hard choices is how Detroit went bankrupt,” he said. “It’s the road to ruin for any city.”
According to the Citizens Budget Commission, a non-profit civic organization, pension contributions are the fastest growing ‘legacy cost.’ New York City’s Office of Management and Budget estimates pension costs will reach $8.5 billion for fiscal year 2017.