Monday, July 12, 2010

Blomberg the Pensioner

The NY Post has a fascinating report on the size and scope of the NYC pension obligation-but for those of us familiar with the work of Nicole Gelinas and E. J. McMahon, there are no real surprises in the paper's revelations: "Taxpayers kick in an average $8.60 for every dollar that city employees contribute to their pensions, a sweet deal costing the Big Apple a bundle. Even though their own retirements are less secure, as private businesses have shifted from traditional pensions to riskier savings plans like 401(k)s, taxpayers' support for rock-solid public employee pension plans is growing. That's because pension funds are guaranteed to grow 8 percent a year -- and taxpayers have to make up the difference if they don't."

But yesterday's story leaves out the elephant in the room-or donkey, depending on what day you're talking about the city's lovely mayoral leprechaun. Gelinas nailed this sucker two months ago in her report on the city's, "big fat Greek budget." As Gelinas pointed out: "As Mayor Bloomberg unveiled his updated $66.2 billion city budget last week, Greek protesters were terrorizing their compatriots and global markets -- pushing the Dow toward an afternoon four-figure drop. In other words, the West's economic crises are far from over. Too bad the mayor's budget -- and, even more so, the politicians bickering over it -- ignores that fact."

Where does Bloomberg's culpability lie? Gelinas once again: "Sure, the mayor has been able to balance the books through three years' worth of fiscal crises. But beneath the balancing tricks lurk scary, permanent gaps: Like Greece, we permanently spend more than we take in. And the gap looks to grow wider. In fiscal year 2009 (which started in July 2008), New York spent 6.1 percent more than it took in via tax collections and other recurring local revenues -- a $2.5 billion gap. In 2010, the city spent 5.2 percent more -- $2.2 billion. For the new year, 2011 -- which starts this July -- the city will spend 7.6 percent more than it takes in, or $3.3 billion. By 2014, we'll cross an important line, with an 11.3 percent gap. Like Greece did, we're approaching scary double digits."

But it is the cost of retirees that is at the heart of all of this mess: "The bickering allows everyone to ignore the real problem -- public-sector retiree costs. It's not simply that taxpayers have to make up for declines in the stock-market portfolios that fund our workers' guaranteed pensions, it's worse: Even as we must pour more cash in, more is pouring out, too. Pension and health payments to retirees are now $13.1 billion a year, up from $7.5 billion in 2002. The cash drain is accelerating as more uniformed workers retire on lucrative disability pensions and others live longer."

But beneath all of the phony mayoral posturing about how well the city balances its budget-eliding the high taxes and confiscatory regulations-is the stark reality that this Mini Me John Lindsay has exacerbated the city's fiscal problems by a reckless ballooning of the size of the municipal payroll-a situation that the ever vigilant Gelinas pointed out over a year and a half ago: "It's almost jaw-dropping that the mayor, faced with these projections and with no hope of a return to a bubble-era "normal" on Wall Street, has made things worse. City workers' salary growth, for example, is set to rise 13 percent between now and our drop-dead year - largely because the mayor late last year voluntarily entered into labor contracts granting hefty raises to both civilian and uniformed workers. The cost of higher pay adds nearly $1.7 billion to the drop-dead-year deficit."

It gets even worse: "Plus, the city-funded workforce has grown by more than 12,000 people in the last three years - so even the 4,556 job cuts that Bloomberg projects won't bring us back to 2005." Yet Bloomberg still gets high marks for fiscal probity from the chattering classes her-a shining example of epistemic closure.

So, all of the current horror stories about bloated pensions should generate outrage-but not just at those workers who have learned how to work the system.  Mike Bloomberg has had eight years to address this mess-and has done absolutely nothing while, at the same time, adding thousands of additional workers to the public payroll. Put simply, when it comes to fiscal probity and re-inventing government, Mike Bloomberg is clueless, and completely out of his depth.

If nothing is done to reform this system-and the size and scope of both the state and city government isn't reduced, along with the concomitant tax burden-LeBron James won't be the last of the rich Mohicans to leave or by pass New York, not by a long shot. We are, to paraphrase Margaret Thatcher, about to run out of other people's money. In NYC, Mike Bloomberg has been the catalyst for this irresponsible policy making, but the amen chorus of quiescent media eunuchs share much of the blame for the sorry state of affairs we find ourselves in-their silence (particularly Mort Zuckerman's) has been truly shameful .