The state of NY is adopting his management techniques:
Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund.
And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund — from the same pension fund.
As word of the plan spread, some denounced it as a shell game and a blatant effort by state leaders to avoid making difficult decisions, like cutting government spending or reducing pension benefits.
“It’s a classic Albany example of kicking the can down the road,” said Harry Wilson, the Republican candidate for comptroller, who holds an M.B.A. from Harvard.
Pension costs for the state and municipalities are soaring, a result of enhanced retirement benefits for public employees and the decline in the stock market over the past two years. And, given declines in tax revenue and larger budget shortfalls, the governments are struggling to come up with the money to make the contributions.
Under the plan, the state and municipalities would borrow the money to reduce their pension contributions for the next three years, in exchange for higher payments over the following decade. They would begin repaying what they borrowed, with interest, in 2013.
I’ll just let you all explain to me how this is a good idea.
joeyess
I just love this:
Notice how there are only 2 choices to solving the problem and neither one of them is called raising taxes?
Person of Choler
You’re a racist, and you hate blind people.
PeakVT
“I’ll just let you all explain to me how this is a good idea.
It’s better than raising taxes or slashing spending during a major recession. The question is what happens if the economy doesn’t recover strongly in a few years.
HRA
I. as a NYS employee who expects to retire a few years or so from now , am ticked off at this move. I have paid into the fund for over 25 years. Yes, we do not get something for nothing as some seem to assume.
What really begs the question is if they did not have the funds to pay those opting to retire before July 31 under a new incentive, then why did they offer it ? BTW, the incentive is a full years pay for the lower tier the year after they reitre and a full years pay, 2 half years pay for the upper classes in 3 consecutive years after they retire.
John Harrold
@joeyess: I’m living in Buffalo right now, and I sent off my second quarter estimated taxes last week. Currently my state taxes are 1/2 my Federal. I’m not exactly rich (post doc with 70k in student loans), but I’m not sure how much more you think I should pay in taxes.
QuaintIrene
Albany is insane. Aren’t they allowing the state to go bust next week?
Michael
There are two solutions –
1. Raise taxes.
2. Close down 50% of the jails.
Groucho48
The “enhanced pension benefits” presumably refers to incentives offered for early retirement. Despite what the article implies, this is a money saver. The early retiree will either be replaced by a younger person with a lower salary, or the position won’t be filled.
eemom
sorta slightly OT, NY mag has this interesting article about ol’ Bernie and what a hit he is amongst his jail homiez:
http://abcnews.go.com/WN/Media/bernie-madoff-success-story-inmates-prison-con-tells/story?id=10842444
And guess what? He’s NOT sorry for what he did! Blames the victims.
And this may indeed be the first time there’s actually been a grain of truth to that “defense.” Never have felt too sorry for his “victims” myself.
Brian J
To a non-expert like myself, this sounds a lot like borrowing against a home for a homeowner or a government borrowing against the future profits from a toll or something like that. In other words, they aren’t stealing the money, just being creative about funding, particularly because of the weight of the problem they are facing. As the article notes, the last time they did this was after 9/11.
I’m not sure if this is a good idea, but I can understand why they are doing it. I’ve read time and time again that pension costs are way out of whack, but I wonder how much of that is simply due to the fall in the stock market. And if that’s the case, will things be better once it goes back up? That seems like too simple an explanation, so if anyone can tell me if, or rather why, it’s wrong, please do.
Also, while pension costs and health care costs are two separate issues, they are related in the sense that they are both supposedly going to sink a lot of governments of all sizes. If that’s the case, I wonder how downward pressure on health care costs at the federal level would affect state and local governments.
I also wonder why there isn’t a greater push for the federal government to assume some of the debt for the states, or at least try to push for emergency funding. The circumstances they are facing are extraordinary, so why not revert to extraordinary measures? It could be contingent on a plan, approved by the federal government, to bring budgets into relative balance as the economy improves.
sukabi
Sure I’ll explain that when you can explain how it was a good idea to take pension funds and “invest” them in the crap shoot that is the stock market.
calipygian
I hate to sound all Republican and shit, but the NYS pension system is gefukt. There have been a bunch of good articles in the NYT recently about the arcane and frankly stupid rules which let people pad their pensions by doing crazy shit at the end, like cashing in a shit load of sick time or working ass loads of OT in the year before you retire, inflating your final year’s earnings which determines your pension. The net effect is that you have working age people earning six figure pensions and the cop in the first paragraph of the article retired at age 44 earning almost 40 percent more in retirement than he did as a cop.
I’m not saying he doesn’t deserve a pension and I’m definitely not saying, “Fuck him, let him eat cat food when he’s old”, but when NYS school administrators cash out in retirement with 200k+ pensions, something is very wrong.
And for God’s sake, don’t Google “LIRR pensions” if you have a weak heart!
As I write this, I DO feel a little bit like the Teabagger who yells “Keep government out of my Medicare!” since I collected my first retirement and service related disability check at age 37, but I knew exactly what I was getting into when I enlisted and I got exactly what they promised. NYS seems out of control and the pension system is way too game-able.
joeyess
@John Harrold: I should have been more specific.
Raising corporate taxes.
Still, my point remains: cut spending and pensions. Never, never mention taxes.
boatboy_srq
@Brian J:
This is pretty much what most states did with the first pass at stimulus: rein in their spending and let the federal dollars carry them. It’s part of why the “recovery” is so anemic (fed largesse plus state parsimony equals zero) and why another round of federal stimulus is so difficult to justify (why spend more federal dollars and incur that debt when there’s no perceived benefit?). It’s pretty obvious NYS is acting on the assumption that no more federal dollars are forthcoming.
I would be more interested in seeing states enact some allowance for deficit spending in circumstances like these. If the states could, in an emergency situation, finance their operations to some extent then this budget tweak of NYS’ and the sort of draconian measures other states are eancting would be unnecessary, and the sort of intervention Washington was trying would have a more visible positive impact.
HRA
@calipygian:
Sick time was never a cash in for NYS employees. It was an option to free health care. They dropped that 2 years ago and now it is zero benefit at retirement.
Not all state agencies offer overtime. My workplace has never offered it. I did receive it for one Saturday when I worked for the labor dept./UI-TRA when we had to compute over 8,000 claims for Chevy workers in 1980s.
My neigbor worked for General Mills and was allowed to inflate her pension with overtime.
At my U., the word was they chiefly wanted the old professors to retire. There is no happiness over lower staff retiring during this time. They haven’t filled positions in my area (libraries) since 1988. They use a few student workers and distribute the duties among the remaining staff.
PaulW
There are two choices:
1) Raise taxes.
2) Put every member of the Club for Greed in jail.
When are people gonna wake up to the snake oil con game the Republicans and their “Kill The Government” mobs have been playing the last 30 years?
Mark
Man, pensions. It just sounds like a relic from a bygone era. I’ve never even worked for a company that offered 401k matching.
Anyways, I think it’s funny that the Republican controller’s Harvard MBA is mentioned. Everyone knows HBS is a two-year summer camp for adults. Having a Harvard MBA means you know a lot of people who have big jobs in finance; it doesn’t mean you know a damned thing about it – if anything, it probably means you were on an ‘educational’ trip to Cabo while the finance class was offered.
AhabTRuler
It is amazing to me how deeply the American populace has internalized the idea that government workers are underworked and overpaid, when often the reverse is true.
LosGatosCA
It’s a good idea because it will cause more pain later.
And we all know that pain later for other people is more virtuous than pain now for yourself. Plus there is always the possibility that the problem will be automagically fixed by Laugher Curve fairies.
Don’t worry, be happy.
J sub D
@AhabTRuler: It’s only people who work in the private sector* who think that. Government employees will bend your ear for hours telling you how qualified, overworked and underpaid they are.
* You know, the ones paying the bills.
J sub D
Somewhat related –
Japan’s Prime Minister Warns That Debt Could Bring a Crisis Like That of Greece
Fortunately, the various states and the federal government are immune from that sort of stuff.
wengler
Hey that Harry Wilson has a MBA from Harvard.
Just like Bush.
Chris
I know nothing about the New York state system, but I know something about the Calif and Utah systems (those being former and current states of residence).
Both are somewhat game-able and are in fact gamed. I have no idea how to fix this, but it is a problem (but not “the” problem, which is multifaceted).
To echo Michael in #7, cutting state spending (e.g., on warehousing drug offenders, which we could do by ending the ridiculous “war on drugs” policy) would help a lot in California, somewhat less so in Utah. This would be good but I suspect still would not really fix things.
All the problems relate to one “base issue”: everything was set up in the days when the population was growing rapidly. As with Social Security, it is a lot easier to collect money from 10 people to pay 2 than it is to collect money from 10 people to pay 8. One can paper over all kinds of flaws with this, and certainly both California and Utah did. Utah is in better shape because it is still growing fairly rapidly.
AhabTRuler
@J sub D: It’s not so much that you missed my point, rather that you are my point.
Because if there is one thing that we have learned, it’s that cutting taxes and reducing the size of government agencies while borrowing insanely to finance corporate welfare and foreign adventurism has absolutely no drawbacks or penalties whatsoever.
bago
I do not have enough localized information to make a salient point. I would prefer to make some kind of comment about proper consideration of costs going forward when you enter into a contractual agreement, but as we have seen, apparently the future only exists until the next quarter, when bonuses are divvied out.
someguy
There’s the usual corruption, but don’t forget the state is digging out from ~15 years of Republican misrule, between Pataki’s deathgrip on the governor’s seat, and Joe Bruno’s deathgrip on the Senate. It’s similar to the mess California is in, and the mess that Mr. Magical Underpants left in Mass.
Naturally, I blame the Dems.
WereBear
I bear a grudge against Paterson specifically because he claimed he cannot raise taxes on corporations and the rich because they would “flee the state.”
This ticks me off because I can’t see Wall Street, and the people who work there, fleeing to Omaha. I just can’t. So it seems bogus to me.
J sub D
@AhabTRuler:
My sister delivers the mail for a living. The job is, in her words, “the easiest and best paying job I’ve ever had”.
I served in the military and had plenty of opportuities to watch sandcrabs (both civil service and contractors) at “work”. IOW, I call your protestations about government workers being underpayed and overworked complete bullshit.
Derek
@WereBear:
It’s total bullshit.
bleh
It’s the magic of leverage!
See, the pension fund now has valuable notes from that safest of investments, a government entity with taxation power.
What could be a better investment for all that cash sloshing around in those pension funds? Why, it’s even better than real estate! I’ll bet the ratings agencies just love it!
Moreover, they can keep this up for a while, thereby increasing the productivity of cash in the system, promoting liquidity, increasing multipliers, and doing lots of other good things to vaguely mathematical-sounding other things, none of which anybody really understands, but all of which generate profits for financial services firms. (And guess where they’re concentrated. That’s keepin’ it in the family!)
Yes, it’s just another jewel in the diadem of American “financial engineering” genius. Hooray New York!
AhabTRuler
@J sub D: Why do you and your sister hate America?
HRA
@J sub D:
What makes you think government employees are exempt from “paying the bills”?
Lurker
@eemom:
For what it’s worth, William Bernstein wrote some thoughts on how regulators failed to protect Bernie Madoff’s victims:
Joe Buck
If the alternative to bogus schemes like this is to cut still further and throw a lot more people out of work, the gamesmanship may be the lesser evil.
I’m really worried about the rampant Hooverism. I’m astounded how many people think that the deficit is the bigger danger than 10% unemployment.
Love me some Tunch
I live in New York and believe it or not – Harry Wilson is one of the few people running for office not responsible for our spectacular mess.
The Harvard MBA mention was unfortunate because of Bush, true. Wilson earned his undergraduate degree from Harvard college, however, and he got in on scholarship, not a legacy admission ( like half of Congress ).
He’s from Fulton County upstate -which is just about as far from Wall Street as you can get. I know all this because I’m from upstate too and its like a Springsteen song up there for twenty years now. Not too many of us go to Harvard – it’s more like Hudson Valley Community College – nights.
I’m actually going to vote for him – even though he’s a republican. The alternative, DiNapoli, is a water boy for the Assembly Speaker.