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Home Publications Blogs Beat the Press NYT Continues Its War on Public Sector Pensions

NYT Continues Its War on Public Sector Pensions

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Monday, 24 February 2014 08:07

The NYT has devoted considerable print space to the problems of public sector pensions, often seriously exaggerating the size of the problems. It has also often overstated the generosity of the benefits, for example by failing to note that many public sector workers do not get Social Security, which means that their pensions will be their entire retirement income.

Today it went long on the exaggerating problems side of the picture telling readers that:

"The difference, $63 billion, is Nycers’s [New York City's main public employee pension fund] shortfall. That money has to be made up before today’s city workers retire — within 14 years, on average. As a result, New York’s contributions to Nycers are rising every year, squeezing the city budget and making it harder for the city to provide public services."

This is not true. There is no legal requirement that city make up this shortfall over the next 14 years. Also, as the article itself points out, this calculation of liabilities is based on the use of risk-free discount rate. The pension fund is of course free to use whatever discount rate it likes to calculate its liabilities. But if the fund gets the return as would be expected from the mix of assets it holds, it would need roughly $23 billion today to make up its shortfall, just over one third of the amount advertised in the article.

Comments (9)Add Comment
Koch's Influence at the Times
written by Dave, February 24, 2014 7:42
Koch was spearheading this through WNET until they removed him from the board. But he still have many arms of influence including at the Times.

There should be a PBS special on retirement funding in general, but it shouldn't contain a political conclusion in the title as the now defunct project did. I shouldn't be about the peril of public pensions, it should be about the entire retirement system including SS, 401ks, IRAs, public AND PRIVATE pensions and the government guarantees of such, etc...

This is a subject nobody will address in full. Without that, no objective conclusions can be drawn with regard to any singular element in this system. So if somebody tries to target one element of our retirement systems in isolation, you should know that it is politically motivated rather than an objective analysis.
look for yourself
written by john, February 24, 2014 3:32
Please review the pensions at just about any city and county in California for recently retired workers and then get back to me how they are not overly generous. An average fireman retiring after just 30 years will take home 100K per year, with annual inflation adjustments, plus lifetime medical benefits in just about any jurisdiction in the state. Look for yourself:

http://transparentcalifornia.com

F
Whataboutery
written by jaaaaayceeeee, February 24, 2014 5:37

Whataboutery doesn't debate, like Dave, what good retirement public policy should entail, if policy makers could afford to debate and legislate, and media report, to benefit the public good (as opposed to Pete Peterson, Kochs, etc.).
ok, I looked at people working as fireman ...
written by Squeezed Turnip, February 24, 2014 5:41
… i downloaded the oakland fireman/policeman pension totals for 2012 and got an average of just under $54,383 for total pension plus benefits.

So, john, where'd you get your number?
California Firemen Anomoly
written by Dave, February 24, 2014 6:20
i saw some information about some misguided legislation that allowed firemen to receive 90% of their peak earnings, causing many to work incredible overtime their last year to pad the retirement. This looks like bad policy, but it is isolated.

I actually do believe some public pensions are overly generous, but it can only be understood in the context of other retirement options and the capacity of the economy to fund all of them.
overly generous public pensions ...
written by Squeezed Turnip, February 24, 2014 7:44
From what I can tell, it seems that the further you go up the administration, the more likely the benefits are awarded beyond sustainable costs. That also happens in the private sector.
Risk-free Discount Rate? Says who?
written by Benedict@Large, February 25, 2014 6:59
The question that jumps out at me is who told the NY Times reporter to use risk-free discount rate? Or perhaps the reporter was told the shortfall was c billion based upon a risk-free discount rate, but the question would still be the same: Who told the reporter this information?
30 year shortfall v. 1 year revenues
written by Amy, February 25, 2014 5:21
Another thing the article does is to show, for a number of states, the unfunded liability as of 2012 compared to the state's annual revenue. The unfunded liabilities have developed over many years and will be amortized over 25 or 30 years or even more. To compare the total unfunded liability to annual revenues is extremely misleading. This is the kind of thing Dean points out all the time.
share website
written by apatchy, February 26, 2014 5:10
follow us
http://www.fapa.bu.edu.eg/en/

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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