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March 9, 2013

Cuomo's borrowing plan isn't realistic

The pension reform plan proposed by Gov. Andrew Cuomo in January has received so much criticism in recent weeks that it might be dead in the water in the state Legislature. But given the plan’s can-kicking nature and dubious math, taxpayers and local officials should welcome this development.

Cuomo’s plan would allow municipalities to pay a lower fixed contribution rate to their pension funds, which would free up money to close short-term budget gaps. The municipalities would be expected to make up the difference at a later date.

If these sleight-of-hand budget gimmicks sound familiar, you’re probably thinking of the 2010 pension-deferment plan passed by then-Gov. David Paterson that allows cities to borrow from their pension funds.

Cuomo’s plan first came under fire from Syracuse Mayor Stephanie Miner, the state Democratic Party co-chair, in January when she cast doubt on the plan, saying it relies on rosy assumptions about employee turnover and future economic downturns.

“How do we know this plan is viable 25 years down the line?” Miner asked at the Joint Legislative Budget Hearing. Miner added that previous pension reform plans hatched in Albany let state workers reduce their pension contributions, and cities’ unfunded pension obligations have skyrocketed as a result.

“Isn’t this what got states like Illinois into trouble?” Miner added, referencing the state whose $96 billion in unfunded pension obligations ranks highest in the country.

The heavier blow came from state Comptroller Thomas DiNapoli, the trustee of the state’s $150 billion pension fund. DiNapoli said he had “serious concerns” about the plan, and that municipalities that agree to it would be putting their credit ratings at risk in the long term.

New York City Mayor Michael Bloomberg also chimed in, saying: “As a general policy, postponing, down the road, expenses that you are going to have every year is not good policy.”

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