The pension management reforms proposed last week by Mayor Michael Bloomberg and Comptroller John Liu could run into challenges from representatives of the very workers they are supposed to benefit.
Gregory Floyd, president of Teamsters Local 237, said he and his 20,000 members weren’t consulted on the deal and had only a few hours’ notice before it was unveiled at City Hall — leaving them with plenty of unanswered questions.
“My goal is to further examine it,” Floyd said. “There may be alternate ways to address the situation without dismantling it.”
The proposal would invest the city’s $120 billion pension holdings using professional money managers and a nonpolitical staff, rather than the mix of consultants hired by the city’s five existing funds. The system would be governed by a 12-member board, not by the 58 trustees for those five funds.
Bloomberg and Liu presented the arrangement as a watershed for making the retirement funds for hundreds of thousands of city workers more professional, more efficient and more lucrative.
Labor leaders like Lillian Roberts from DC 37 and Steve Cassidy from the Uniformed Firefighters Association stood with them to praise the proposal, which is designed to generate higher returns and lower costs similar to those enjoyed by the endowments of Harvard and Yale.
Yet Floyd said he worries about the risks of that strategy, which can involve investing in hedge funds instead of basic equities, and doesn’t think his members were adequately represented in the discussions leading up to the plan’s announcement.
“I fear that we will not have a voice in who’s doing the investments any longer,” Floyd said. “They use hedge funds which may yield a high return, but it also brings a greater risk.”
Floyd, who holds a seat on the seven-member board of the New York City Employees Retirement System, the largest of the five funds, wrote to Liu yesterday to say it was too early to sign off on the plan.
“If the proposal you have made does benefit the system members and the City of New York then it should be closely reviewed,” Floyd wrote. “We cannot understand why our views were not sought since we are both Trustees and have the same fiduciary duty to act in the best interest of the Fund. We expect, if not demand, that all Trustees work together to determine if, and in what form, the proposal should move forward.”
Transport Workers Union Local 100 President John Samuelson and Public Advocate Bill de Blasio, who also hold seats on the NYCERS board, have taken no position on the proposal and did not respond to requests for comment.
The pension overhaul would require city and state legislation, and officials involved have stressed that many details remain to be resolved. Any leader with substantive problems with the proposal will surely find ways to stall or block the process — as will anyone who wants to find leverage for another priority of theirs.
Liu spokesman Michael Loughran said the comptroller had not received Floyd’s letter, but is bullish on the plan.
“Bottom line, this innovative proposal will turn an outdated investment mechanism into a best-in-class model that taxpayers and pensioners can be proud of – lowering costs, protecting benefits and enhancing returns,” Loughran said. “We look forward to our continued discussions on this issue.”