Denial of Tier 4 Pension Rights and the New Executive Director

Last January I wrote about NYCERS’s effort to force certain new correction officers, sanitation workers and DA investigators into Tier 6 who had existing Tier 4 NYCERS memberships.

Based on current inquiries for help from such members NYCERS is continuing to violate these members’ constitutional rights.

I am absolutely certain that neither the police nor fire pension funds are following this illegal procedure.

On Tuesday, September 5th, the new executive director will start working at NYCERS. I assume she will join the NYCERS pension system. If she does, NYCERS will initially enroll her as a Tier 6 member. She also has an active Tier 4 membership with NYSLERS. She has the right to transfer that membership to NYCERS, if she chooses to do so.

If she does choose to to transfer her Tier 4 state membership, it will be very interesting to see whether NYCERS correctly switches her tier status back to Tier 4. NYCERS has provided no legal rational for its illegal actions in forcing existing Tier 4 members into Tier 6.

I wonder whether the NYCERS Trustees informed the new executive director of this issue?

Notes to the New Executive Director

With the new executive director starting after Labor Day, I thought I would share a few ideas from a former executive director.

1. Unlike NYSLERS, NYCERS has an independent administrative budget. This gives you tremendous resources to effectively run NYCERS. I recommend that you carefully read the enabling legislation which created the budgeting authority. See Chapter 593 of the Laws of 1996.

2. Even in the context of the state’s civil service laws, you have a great deal of flexibility in dealing with executive personnel decisions. There is a clear need to make radical changes in senior staff at NYCERS.

3. The budgeting law also provides you (via annual Board approval) with broad authority to enter directly into contracts for goods and services. You will quickly realize how helpful this is but it is a very sharp knife. Be careful.

4. The Board of Trustees is a direct descendent of the old Board of Estimate with three major unions thrown into the mix. It escaped the Supreme Court one person – one vote decision but not the permanent war between the Mayor and the Comptroller.

5. I recommend that you read my postings to get a detailed view of the organization that you are taking control of. You may not agree with everything I write but you will get concrete statements of facts. You will also find that the previous executive director left no paper trail of her decisions and actions while she was in charge of the agency.

6. The NYCERS web site needs a significant expansion of its content both with respect to general benefit information and detailed member/retiree historical data that NYCERS has in its massive computer files.

7. Current production reports are a sham and service levels are atrocious given the amount of money appropriated in the agency’s budget.

8. While the NYC Law Department is NYCERS’s statutory legal counsel, your personal expertise with NY pension law puts you in a strong position to insure members and retirees are treated correctly. In the last twelve years, NYCERS executive staff has taken a great deal of incorrect and mean spirited actions against members and retirees. I have written extensively about this in my NYCERS blog.

9. Personal plug: I run a successful pension and IT consulting firm and would be very interested in providing services to my old agency.

The New Executive Director

On Monday the Board of Trustees appointed a permanent executive director. Her name is Melanie Whinnery. She will start on September 5th. She currently works at NYSLERS

I am so very glad that the Trustees chose to give the NYCERS staff a break from the mayhem of the last 12 years. Lets hope this was a good decision.

Somethings Never Change: the Actuary and the Assumed Interest Rate

In September, 2015 I wrote a posting about the new NYCERS actuay, Sherry Chan, who was appointed in May, 2015. She is currently being paid an annual salary of $279,000.

Specifically I wrote:

The assumed interest rate is the key component of the annual pension costs that the city and the other participating employers must pay to the pension funds each year. It will be interesting to see where Ms. Chan stands on the 7% net of fees rate. She will be required to make a recommendation this winter for a new five year rate effective July, 1, 2016 and Albany will have to enact enabling legislation by June 30, 2016.

I suspect she will punt and ask for a one year extension of the old rate. North did this all the time. It is a bad fiscal policy and contributes to the under-funding of the pension funds.

Sure enough on June 30, 2016, the governor signed Chapter 61 of the Laws of 2016 which was a one year extension of the 7% (net of fees) interest rate. Ms. Chan stated that she was to busy during her first year to recommend a new five year rate.

This year, on June 29, 2017, the governor signed Chapter 71 of the Laws of 2017 which was again a one year extension of the 7% (net of fees) interest rate. This time Ms Chan stated that she chose not to recommend a five year interest rate because she was waiting for the completion of the two year actuarial audit.

As a point of reference the previous two year actuarial audit was completed in 2016.

I could yell and scream but, what the hell, nothing is going to change.

DFS and the Elusive Pension Audits

It is June 26, 2017, a sunny June day. It is also two years ago that the NYS Department of Financial Services announced a major audit of the seven major NYS retirement systems.

There are still no audits reports from DFS.

For the record, DFS is scared to death to publish any reports on the seven retirement systems. DFS knows how bad the situation is. They can either report the facts and create sheer terror, or they can fake it and be on record for hiding the facts.

Just stop billing the retirement systems for your bullshit audits and save the taxpayers some money.

Budget History at NYCERS

On April 23, 2017 the NYCERS Trustees adopted the FY-2018 Administrative Budget for the agency. It increased the payroll by $645,000 from $31.06M to $31.70 and the OTPS budget by $900,000 from $20.92m to $21.83M. The F/T head count was increased from 401 to 411. The P/T head count stayed at 35.

Interestingly, the Chair, John Adler, voted against the budget primarily because of the increase in the F/T head count. With the Comptroller's vote the increased head count was adopted. It is a hard budget rule that head count drives costs.

The table below charts out the history of the NYCERS admin budget back to 1986. That was before the 1996 passage of the “corpus funded” budget law.

The 1989 NYCERS budget was the high mark for the NYCERS budget while it was still part of the total city budget. As of July 1, 1996 NYCERS’s budget began to be funded through the assets of the system under the control of the trustees and it was no longer an item in the city's budget. The mayor and the comptroller each have a super vote on the budget resolution in so far as at least one of them needs to vote for the budget for it to be adopted.

In 1996, the non-loan agency head count was 154 F/T employees and 30 college aides. The total budget, both PS and OTPS, was $8.77M. The agency was on life support and the Mayor's Executive Budget had set the NYCERS head count at 146 for 1997.

From 1997 to 2005 with the help of "corpus funding" the agency's F/T staff increased from 154 to 342 along with the original 30 college aide positions. That was a radical increase of 186 positions. In addition in 2000, NYCERS moved into modern office space (133,000 sq. ft.) in downtown Brooklyn.

The NYCERS budget in 2006 had a F/T head count of 342 and a total budget of $34.94M, not including fringe benefit costs. FY-2006 was the last budget I prepared. At that point NYCERS was the best staffed agency in the city and the best funded. If necessary, NYCERS could have performed at a top level indefinitely without any increase in head count.

As of July 1, 2017 NYCERS will have a head count of 411. That is an increase of 69 people over the last 11 years. You would think NYCERS must be functioning flawlessly. It is not.

In 2015, I wrote a critical review of a IT upgrade that NYCERS was planning for the five year 2016-2020 budget cycle. The project is two years through the five year cycle with nothing much done. The only good thing is that the trustees have not let NYCERS spend the full $132M that the staff had requested.

Last year the previous executive director resigned. Adler and the trustees are now in the process of appointing/hiring a new executive director. Let us hope that they find an honest competent person for the position.

History of NYCERS Admin Budget 1987-2018

Fiscal Year	F/T Count	P/T Count	College Aides / Hourly	PS Budget	OTPS Budget	Total	% Increase
1986	205	0	30	$5,916,793	$1,423,743	$7,340,536
1987	203	0	30	$6,621,803	$1,881,300	$8,167,220	11.2%
1988	223	0	30	$6,621,803	$1,881,300	$8,503,103	4.11%
1989	243	0	30	$7,849,731	$1,932,351	$9,782,082	15.4%
1990	238	0	30	$8,284,883	$2,578,693	$10,863,576	11.06%
1991	229	0	30	$6,826,473	$2,475,205	$9,301,678	-14.38%
1992	225	0	30	$6,646,549	$2,216,262	$8,862,811	-4.72
1993	223	0	30	$6,858,991	$2,198,882	$9,057,873	2.20%
1994	194	0	30	$6,778,541	$2,183,101	$8,961,642	-1.06%
1995	167	0	30	$6,202,062	$2,080,504	$8,282,566	-7.58%
1996	154	0	30	$6,199,709	$2,573,715	$8,773,424	5.93%
1997	200	0	30
1998	230	0	30
1999	270	0	30
2000	290	0	30
2001	320	13	30
2002	320	13	30
2003	334	13	30
2004	334	13	30
2005	342	13	30	$19,737,687	$14851355	$34,589,042	288.6%
2006	342	13	30	$20,255,911	$14,683,855	$34,939,766	1.01%
2007	364	13	0	$22,616,783	$14,258,471	$36,875,254	5.54%
2008	371	13	0	$23,597,857	$17,259,313	$40,857,170	10.80%
2009	371	13	0	$25,189,842	18,208,861	$43,398,703	6.22%
2010	372	12	0	$26,046,827	$17,777,228	$43,824,055	0.98%
2011	372	12	0	$26,046,827	$18,492,228	$44,539,055	1.63%
2012	372	12	20	$25,756,827	$18,781,428	$44,538,255	0.00%
2013	380	5	30	$26,623,635	$17,951,822	$44,575,457	0.08%
2014	383	5	30	$26,813,635	$18,761,240	$45,574,875	2.24%
2015	342	5	30	$29,131,972	$18,154,572	$47,286,544	3.76%
2016	342	5	30	$30,233,989	$19,407,619	$49,641,608	4.98%
2017	401	5	30	$31,056,080	$20,916,796	$51,972,876	4.70%
2018	411	5	30	$31,701,410	$21,832,718	$53,534,128	3.00%

NYC Pension Costs for FY-2018

The total costs for the five actuarial pension funds for the NYC FY-2018 Budget is $10.009B up from $9.663B in FY-2017.

Teachers Retirement System	$3.744B	110,000 working teachers	$34,000 per teacher.
Board of Education Retirement System	$.295B	20,000 active employees	$14,700 per employee.
NYC Employees Retirement System	$1.825B	100,000 active city employees	$18,200 per employee.
Police Pension Fund	$2.393B	35,000 police officers	$68.400 per police officer.
Fire Pension Fund	$1.200B	11,000 firefighters	$109,100 per firefighter.

There is also a $.552B cost in the budget that is unassigned to any of the five funds but clearly stated in the budget for FY-2018.