Monday, July 19, 2010

NYC Pension Costs for FY-2011

Based on the NYC adopted budget figures the pension costs for NYC for FY-2011 are as follows:

SystemFY-2010FY-2011
TRS$2.409B$2.428B
NYCERS$1.199B$1.304B
BERS$0.124B$0.171B
NYPPF$1.980B$2.083B
NYFDPF$0.874B$0.890B
Adjustmentnone$0.603B
Total$6.588B$7.481B

It is not clear how the $603M adjustment figure will be divided up among the five pension funds.

The numbers in the table come from the the extensive schedules provided on the NYC OMB web site. There is so much info on the web site, that the data almost hides itself. But it is there, nicely broken down. The cost for NYCERS does not include expenses paid by public authorities which ususally run about 45% of the city cost.

It is clear that based on membership the police, fire, and teachers pension funds are the major source of pension costs and unfortunately, they all have underfunding issues. It is also clear that these costs are not sustainable and that all parties will have to make major changes.

As I have said in the past, there are three keys to pension success or failure. They are funding, investing, and benefits. The most immediate and crucial key right now is investing. While the city should be putting more money into the funds and Albany needs to scale back benefits, more importantly, the pension funds should be uncompromisingly prudent with their investment decisions.

When it was reported last week that the NYCERS trustees were planning to invest in hedge funds, my opinion was that the trustees were again being lead astray. Just remember that the assets belong to the members and retirees of NYCERS, and not to the city or the trustees.

The NYCERS trustees should adopt a certain level of humility with regards to their ability to invest money. Their annual rate of return for the 10 year period from 1999 to 2009 is 2.14%, not 8%. In addition to their total lack of accountability for investment returns, the trustees have managed to increase annual investment expenses from $30M to $150M during the same 10 years.

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