Sunday, April 26, 2020

Budgeting in the Plague Year

At the March 12, 2020 NYCERS Board Meeting, the executive director requested five additional workers to address a significant delay (eight to ten months) in finalizing the benefits for new retirees. She stated the delay was due to increased workload and staff turnover. I had previously commented on a six-month delay in producing final option letters in a December 2019 posting.

Obviously, the delay was longer than six months. The director was quite comfortable asking for the five new workers even though she had increased her staff by 36 new workers over the last three years.

One month later at the April 7, 2020 Board Meeting, the Chairperson asked the trustees to lay over the resolution approving the NYCERS FY-2021 Administrative Budget. The reason he gave was the uncertainty of the City’s own FY-2021 budget due to the Covid-19 epidemic.

NYCERS has been radically increasing its admin budget for several years now. In 2015 NYCERS had 392 full-time workers and a budget of $47.3M. In 2020, NYCERS has 433 full-time workers and a budget of $81.1M

Even with a possible federal bailout, the City is going to have to make serious budget reductions for non-critical functions. Prior to 1997, I spent many years dealing with savage budget reductions but this time it is going to be much worse. The NYCERS budget is technically independent of the City’s budget but the trustees are not immune from the impact of the virus.

It is not out of the question that NYCERS will be required to cut $20M from its FY-2021 budget.

While the FY-2020 payroll is only $35.3M, there will be, no doubt, a total hiring freeze in FY-2021 and maybe layoffs, if there is a threat to essential workers. The major contractions, however, will occur in the OTPS budget which is currently $45.9M in FY-2020. This amount was only $21.8M in FY-2018. You can see the possibility of an even greater reductions than the $20M.

The saving grace of these reductions is that NYCERS might get back to doing its basic work correctly and on time. NYCERS may even get back to designing improved application systems with career civil servants rather than with “remote” consultants.

Side Notes:

  1. NYCERS currently subsidizes the Comptroller’s Office with $4M/year. That will have to stop.
  2. NYCERS is currently spending $240M/year on investment expenses. That will have to be radically reduced. Most pension funds around the country are going to have a war with Wall Street, if the costs are not radically cut.