Monday, December 22, 2008

Budget Opportunities

As we have pointed out, both the mayor and the governor seem lost when it comes to finding creative ways to save the tax payers from paying through the nose during the current budget meltdown-and one of the most expensive government expenses is for pensions, something that both men don't want to touch. As Adam Brodsky points out: "GOV. Paterson and Mayor Bloom berg may be about to blow the biggest chance in a generation to fix New York's long-broken, budget-busting public-pension system. Indeed, their planned remedies fall so far short, and come with such a steep political price, it may be wiser for them to simply hold their fire - and do nothing - rather than waste a precious opportunity."

The problem here us that pensions are fixed no matter how badly the market is doing-unlike most of us who have taken a bath along with the decline in stocks; and the benefits in New York are unmatched elsewhere: "Payments to the funds for New York public-employee pensions devour huge sums of taxpayer dollars, largely because the benefits are more generous than in other states - or in the private sector. Retirees are also living longer, thus further fueling cost spikes. Meanwhile, politicians - pandering to public-sector unions - regularly sweeten the employees' pot even more."

If something's not done soon, the tax payers will be hosed big time: "The really bad news: It may be impossible, at this point, to stave off pension-driven fiscal calamity. Sagging financial markets - in which the funds are invested - have sapped fund values. And, since retirement benefits in New York are guaranteed, taxpayers must cough up the difference. If the markets don't recover soon, New Yorkers may face mammoth new tax hikes and truly draconian cuts in government services to keep pension funds whole. Taxpayers will be rightly furious to learn that they have to pay up big-time to hold civil-servant retirements harmless - even as their own 401(k) plans have shriveled."

What we need is a pay-as-you-go system; just like the private sector: "The private sector has largely switched to a saner system. With each paycheck, workers and firms contribute set amounts to personal retirement accounts. If government did that, it would take an enormous load off taxpayers' backs (and make it easier for budget planners, too)."

Will we get this? Not likely, since neither Bloomberg nor Paterson are willing to take on the public employee unions. But if they don't we're all headed for fiscal disaster; "Far better for Bloomberg and Paterson to amend their plans and push for more fundamental change - or just stand down and wait for another moment. Perhaps that moment will come when a political leader with more backbone steps up. Or when fiscal collapse forces a major overhaul. But by then, of course, it may be too late."