Saturday, August 3, 2019

The FY-2020 Budget and the Legacy Replacement Project

On April 11, 2019 the NYCERS Board of Trustees adopted the agency’s new budget for FY-2020. After almost two months I was finally able to get the basic details on the FY-2020 budget. Wouldn’t be a great idea for NYCERS to store its administrative budget history on the NYCERS website? I’m afraid that will never happen. NYCERS has even dropped the two year history of its financial reports and only keeps the current CAFR online.

The total (PS & OTPS) budget increased from $77.1M to $81.1M, a 5.2% increase.

  • The full time head count increased by 5 to 433.
  • The part-timers increased by 8 to 43.
  • The number of consultants is approximately 39.
  • The PS budget is $35.3M.
  • The OTPS budget is $45.9M.
  • The fringe benefit budget is $10.7M.
This is a significantly smaller increase than what the trustees approved for FY-2019 which went from $53.5M to $77.1M. That was a 44.1% increase. The FY-2019 increase was driven primarily by the cost of the customer relationship software (CRM) contract that NYCERS granted to Salesforce. Of course there was the $2.5M cost for renovating the 23rd floor. As a point of reference the 23rd floor was totally built from scratch in FY-2000 as part of a complete office build out in brand new office building.

Based on a statement by the Chairperson, the $81.1M total is only an interim amount. The executive director will be proposing a mid-year increase to cover the cost of an expected contract that will result from a pending RFP for the Legacy Replacement Project (LRP). The closing date for this RFP is July 15, 2019. NYCERS, however, is projecting to not sign a contract for the project until April-May of 2020. So the full annual cost of the LRP will not hit the FY-2020 budget.

NYCERS staff originally presented the LRP concept to the trustees in the spring of 2015. It was supposed to be a five year project running from FY-2106 to FY-2020. The NYCERS total budget in FY-2015 was $47.3M. It is now $81.1M. Based on NYCERS own projections it will be $123.2M next year.

NYCERS finally released the RFP for this project in December, 2017. It was withdrawn because of low vendor response and reissued again in April, 2019. NYCERS has planned to take about 9 months to evaluate the RFP and negotiate a contract. With a start date in the spring of 2020 and projected five development cycle, the project should be completed in the spring of 2025, ten years after it was conceived. It is possible that the selected vendor will complete the work in less than five years but that is not likely.

My estimate of the total cost of this project from FY-2019 to FY-2025 will be at least $390M.

The actual and projected OTPS budget amounts for FY-2018 to FY-2024 as stated by NYCERS are as follows and this list does not included the planned fifth year of LRP contract, 2025.

  • 2018 - $20.9M (actual)
  • 2019 - $43.5M (actual)
  • 2020 - $45.9M (approved)
  • 2021 - $88.0M (projected)
  • 2022 - $88.9M (projected)
  • 2023 - $89.8M (projected)
  • 2024 - $90.5M (projected)

What is worth $390M? What significant benefit justifies this enormous cost?

And what about the risk that it fails? NYCERS is putting in place a huge oversight structure which is a big part of the project’s cost, but will the trustees have the nerve to pull the plug if things go bad?