New York City Police and Firefighter Pensions: Somebody Call OSHA

This is my third post on a tabulation of Census Bureau data on public employee pension plans in New York and New Jersey over the decades.  The first was on the separate pension funds for teachers.  The second was on the large plans that cover most state and local government pensions in the two states.  This post is on the separate pension plans for New York City and New Jersey police officers and firefighters.  Although they have different benefits, police officers and firefighters in the rest of New York State are covered by the same state pension system that covers most public employees, and data for police and fire is not reported to (or collected by) the Census Bureau separately.

The data show that the New York Police Pension Fund Article 2, the New York City Fire Department Article 1B Pension Fund, and the New Jersey Police and Firemen’s Retirement System are deep in the hole.  In the most recent year for which data is available they paid out the equivalent of 8.0% to 10.0% of their assets, but those assets ought to be sufficient to pay all of the benefits owed to current retirees, most of the benefits owed to those soon to retire, and some of the benefits owed to younger workers.  And given how generous pension benefits are for New York and New Jersey’s police officers and firefighters, that means there ought to be enough money in the funds to pay monthly benefits for decades.  There isn’t.  And in the case of the NYC firefighter’s fund there hasn’t been for decades.  The charts and discussion are below.

There are a couple of important differences between the police and fire pension funds and the other pension funds around today.  First, they have predecessors.  It seems that at one time many small municipalities had their own separate pension funds, particularly for police officers and firefighters, but these were gradually merged into larger state funds.  Often the older funds remained for decades after new employees had been moved into the state funds.  As of 2011, for example, there was still one regular retired and one disabled retired member of the city of Albany NY Police Pension Fund collecting benefits.  The Albany Fireman’s Pension Fund seems to have expired in 2007.

But it isn’t just small funds that have been closed to new members and eventually phased out.  Before the NYC Police Pension Fund Article II there was the New York City Police Pension Fund Article I.  That pension fund essentially ran out of money in the early 1960s, with New York City taxpayers forced to pay all of its pension benefits going forward.  In 1962, taxpayers put in $31.6 million, and the fund paid out $33.1 million in benefits, leaving $514,000 cash on hand.  The $31.6 million taxpayers put in would be $235 million in today’s money.

Before the New York City Fire Department Article 1B Pension Fund there was the New York City Article I pension plan.  In 1962 it paid $24.5 million in benefits, but had only $3.2 million in assets left; New York City taxpayers put in $25.4 million to make sure the pensions would be paid, or $182 million in today’s money.

And apparently after New Jersey had consolidated local pensions into the New Jersey Consolidated Police and Firemen Pension Fund, it too felt the need to start over with a new plan.  The old plan still paid out $6.3 million in pension benefits in 2011, but it only had $5.9 million in assets left.

Yesterday’s taxpayers were not supposed to shift the cost of the public employees who worked for them onto future taxpayers.  The entire cost of a police or firefighter’s pension is supposed to be paid for, assuming a reasonable rate of return, while they are working.  But in each of these cases, and perhaps most cases, the old pension plans ran out of money before they ran out of benefits, forcing later taxpayers to kick for past workers in while receiving nothing in return.

Perhaps the new plans were created to provide a fresh start with no funding deficiency.  “This time we’ll do it right,” more than one politician probably said.  But did they?

Here is a series of charts on currently active the NYC and New Jersey police and fire pension plans to explore that question.  I again suggest downloading the spreadsheet and printing out the charts before reading this.  I have received a little training and also managed to imbed the charts in the text.


Chart 1 shows that annual benefit payments are a high percent of assets for the NYC Police Pension Fund, the NYC Fire Pension Fund, and the New Jersey Police and Fire Pension fund.  This ratio implies underfunding, particularly given how young police and firefighters can retire and how many years they may thus collect.

Chart 1

The underfunding goes back a long way for the NYC Fire pension fund, which has had the equivalent of 11 years or benefit payments or fewer in assets consistently over the years – perhaps going all the way back to Mayor Lindsay and the pension increases of the late 1960s.  In 2011, the assets in the fund were equal to about 10 years of benefit payments.  In 1981, before the long secular stock market boom that lasted (with occasional interruptions) from 1982 to 2000, benefit payments were equal to 19.0% of assets.  That means there was only enough money in the NYC fire pension fund to pay just five years of benefits, or a little more with a return on assets until the assets were gone.

Underfunded then, the NYC fire pension plan is underfunded now.  Not long ago, a major analysis of data for all large pension plans across the country found that the New York City Teacher’s retirement plan was the most underfunded in the U.S.  But a couple of years afterward, another study found the New York City Fire Pension Fund was worse off still, with enough assets to cover just 54.2% of required benefits.

That source put the funding level for the New York City Police Pension Plan at 71.3%. But I believe the hole is deeper in each case.  So how did we get in this mess? In my post on the NYC Teacher’s Pension fund, I found that the crisis was caused primarily by large increases in benefit payments after the pension increases and “incentives” scored by the union in 1991, 1995, 2000 and 2008.  The 2008 deal applied only to NYC teachers; the 1991 and 1995 deals seemed not to hit the other big NYC pension plan – NYCERS – as hard.  Only the 2000 deal, which retroactively increased pension benefits for inflation, seemed to have a big impact on pension benefit payments for all the public employee pension plans in New York and (due to a similar deal at about the same time) New Jersey.

Chart 2: This chart shows the level of pension benefit payments for the NYC police and fire pension plans over the years, with past figures adjusted upward for inflation.  Ignoring possible errors (such as police benefit payments from 1989 to 1991), the inflation-adjusted cost of pension benefit payments has generally increased consistently for both the NYC Police and Fire pension plans.  Rather than jumping suddenly, perhaps due to retroactive pension deals.

Chart 2

There was an initial ramp up as the first members of the new funds (as opposed to the older pension funds) retired.  The data doesn’t show any jumps associated with early retirement incentives in the late 1980s, 1991 or 1995, as for the New York City teachers and other employees, and does not show the big reduction in the retirement age in 2008, as for the teachers alone.  After all, NYC police officers and firefighters were already entitled to a full pension after 20 years of work, at any age no matter how young.  More generous than that would have been really ridiculous.  Apparently even the New York State legislature is unwilling to force NYC taxpayers to support young “retirees” in their late 30s for the rest of their life after they worked just 15 years.

Retired NYC police officers and firefighters, however, did benefit from the increase in benefit payments for inflation retroactively awarded in 2000.  From 1999 to 2003, the pension benefit payments increased by 18.2% more than inflation for the NYC police pension plan, and 32.8% more than inflation for the NYC fire pension plan.  Once again, the 2000 deal is the one deal that really caused pension benefit payments to escalate hugely for all the pension plans in New York State.  And New Jersey had a similar deal at about the same time.  New Jersey’s police and fire pension plan benefit payments increased by 25.8% more than inflation from 1999 to 2003.

Chart 3:  This chart shows the ratio of working police officers and firefighters to pension fund beneficiaries receiving payments.  Since New York City police officers and firefighters may retire with a full pension after just 20 years of work at any age, and life expectancy is now around 80, there have been fewer working police officers and firefighters than retirees (plus survivor beneficiaries) for some time. In fact, if every firefighter and police officer hired on at the youngest possible age, say age 20, and worked for the minimum number of years, to age 40, we would only expect one half (0.5) officers on the job for every retiree.

Chart 3

Of course some are hired later, work later, or both.  But by the late 1980s, the ratio of working NYC police officers and firefighters to those retired had already fallen close to parity. Not even including the 1,250 former police officers still receiving benefits under the previous pension plan as late as 1992.  Nicole Gelinas is apparently stunned that there are more retired officers and survivors receiving pensions than there are working police officers.  She could have been stunned decades earlier.

By 2010 there were just 0.8 working police officer for every retired police officer, and just 0.7 active firefighters for every retired firefighter.  I’d expect that ratio to keep going lower as the city’s fiscal problems increase.

Chart 4:  This chart shows contributions to the NYC police and fire pension funds by taxpayers and employees.  The taxpayer pension underfunding seen in the New York City teacher pension fund immediately after the 2000 pension deal, and for NYCERS for several years in the late 1980s and early 1990s, was not repeated for the New York City police and fire pension funds, at least not the same extent.  With the exception of a cut in contributions to the NYC police pension funds during the deep early 1990s recession, substantial taxpayer contributions have been made each year since the early 1980s.  Prior to that the NYC fire pension fund received less funding, but there appears to have been a large one-time taxpayer payment into the fund in 1982.

Chart 4

What about contributions by the police officers and firefighters themselves?  A deal was cut way back in the early 1960s for taxpayers to make the “employee” contribution to the NYC police pension fund, after an officer had worked a few years on the job.  The herky-jerky pattern of contributions by the police officers themselves in recent years, as recorded by the Census Bureau, implies that this has changed, in both directions, more than once.  Or the “employee” contributions were recorded as such in some years, even though taxpayers were making them, and as taxpayer contributions in other years.  A review of the latest police pension fund documents makes no mention of employees not having to make pension contributions after a few years.  Older documents did mention such a deal.  Perhaps the police have started contributing to their pensions, so they could claim that they paid for their pensions as the taxpayer burden soars.

Chart 5:  This chart shows the ratio of taxpayer pension contributions to pension fund benefit payments for the NYC police pension fund and the NYC fire pension fund, and the New Jersey police and fire pension fund.  This is another measure of the substantial taxpayer pension contributions made to the NYC police and fire pension plans over the years.  Taxpayer contributions always equaled at least half of benefit payments paid out for the NYC plans.  In New Jersey, on the other hand, contributions to that state’s police and fire pension plan were cut to zero for several years in the 2000s.  Once again, as for the other pension plans, past New Jersey taxpayers get more of the blame for the pension disaster than past taxpayers in NYC.  More than perhaps anywhere else in the country, NYC taxpayers have been made to pay for pensions.

Chart 5

Today, NYC taxpayers are putting even more into the police and fire pension plans each year than those plans are paying out to beneficiaries.  The good news is at that level of contributions the plans it may take a long time to get out of the hole, but at least they won’t get further into the hole.  Benefits are being paid for out of each year’s city budget, while any pension fund investment returns are used to help the pension plans recover.  The bad news is that as a result of past underfunding, going back to Mayor Lindsay in the 1960s and early 1970s, and the benefit increase of 2000s (and other small ones), today’s taxpayers are getting zero benefit of having a pension plan with assets and investment returns at all.  New York City taxpayers are paying as much as they would without any assets in the police and fire pension plans.

Chart 6:  This charts shows disability pension beneficiaries as a percent of total retired police officers and firefighters, and payments to disabled beneficiaries as a percent total payments to retired police officers and firefighters.  (The recipients of survivor benefits are excluded from the calculation, since they may be survivors of workers who had been regular retirees, disabled retirees, or those who died on the job).

Chart 6

In 2010 those receiving disability pensions from the NYC police pension fund accounted for 35.0% of the former police officers receiving payments from the fund, and payments to the disabled accounted for 39.0% of total payouts.  For the NYC fire pension plan, in 2011 those receiving disability pensions accounted for 62.7% of the former firefighters receiving benefits, and 72.8% of the payments to former firefighters.  In New York City, those who become disabled on the job can receive a pension benefit of 75.0% of their final salary, rather than 50.0% for regular retirees.

The share of NYC police officers and firefighters receiving disability pensions, and the share of the cost going to such pensions, is higher than for the New Jersey police and fire pension fund, and higher than most large funds I was able to identify as specifically serving police officers and firefighters.  Although the report of zero disabled pension beneficiaries in Los Angeles and North Carolina seems wrong.  The disabled also account for more than half the pension beneficiaries and payments for the Washington (state) Law Enforcement and Firefighters Retirement System and the San Jose (California) Police and Fire Department Retirement Plan.

Chart 7:  This chart shows disabled pension benefit recipients as a percent of total (non-survivor) pension benefit recipients for the NYC police, NYC fire, and New Jersey police and fire pension plans over time.

Chart 7

While high, the percent of former NYC firefighters who were disabled (rather than regular retired) had been falling until recently.  In 1977, disabled beneficiaries of the NYC fire pension plan accounted for 68.6% of the total, but by 1997 it had fallen to 51.9%.  Then it started to increase, implying more of those starting to collect benefits were claiming disability.  Some of the reversal and recent increases may be a result of 9/11.  The percent of pension beneficiaries who were disabled increased from 53.5% in fiscal 2001 (before 9/11) to 62.7% of beneficiaries in FY 2011.  Meaning a very large share of those retiring recently have been disabled.

More on 9/11 in a moment.

Even though firefighting is a risky job, one has to wonder why the pre-9/11 baseline of more than half of former NYC firefighters disabled was acceptable to the firefighters’ union.  One might say the same of the police officers’ union, given that more than 40 percent of NYC police officers were going out on disability before 9/11.  Why did no one call the federal Occupational Safety and Health Administration (OSHA) to file a complaint?  The figure for the police has continued to fall (perhaps because the level of violence in the city has fallen), but it was still 35.0% in 2010.  (New Jersey’s police and fire pension fund doesn’t often report the data needed for this calculation, but when it does the share of that state’s police officers and firefighters going out of disability is much lower than in NYC).

There are several ways of looking at the high pre-9/11 rate of police and fire disability pensions in New York City.  One is to ask what the NYPD and NYFD were and are doing wrong to have such a terrible safety record.  My father-in-law was a lineman for the old AT&T.  He told me that whenever one of the firm’s workers was killed on the job, and there were over 1 million people working for the company in the 1950s and 1960s, everyone in the company got a letter describing the accident and what if anything might be learned from it.  What should be done differently?  I haven’t gotten word of the same level of concern for the high level of disabling injuries for NYC public safety workers.

A second way of looking at it is to be suspicious there are abuses going on, like those discovered at the Long Island Railroad.

The Mayor of Providence, Rhode Island, for example, is suspicious of disability pensions there.

“Accidental disability pensions will make up more than half the $29 million the Providence Fire Department spends on pension payments this year, according to an analysis of payroll records by City records show 58 percent of all firefighters or their families received a disability pension for being hurt on the job as of January – 329 out of 569. All but 10 of those are tax-free. That’s up from 56 percent in 2008, when Target 12 last ran the numbers as part of our Probing Pensions investigations.”

The public safety commissioner plans a review.  The union blames the city for a lack of attention to the issue.  “The city does no housekeeping, no review, other than to have your own doctor submit a statement saying you’re still disabled,” according to its leader.  “They sit on their hands and they complain,” he added.

Moreover, the city of Providence may be suspicious of recent retirees because of the soaring cost of abuses by past retirees, yet another way the ill deeds of Generation Greed are visited upon the next generation. “The five most lucrative pensions in city government all go to former fire department officials, all of whom retired in the early 1990s, when eight out of 10 of the department’s workers were retiring for disabilities.”  That would be during one of the terms of Mayor Vincent Albert “Buddy” Cianci, Jr., who twice had to resign as Mayor due to felony convictions.

A third possible reason for a high level of disability retirements is that many police officers and firefighters stay on the job until an injury forces them to retire, rather than simply cashing in after the minimum 20 years.  In that case most of the disability retirements would be either earlier or later than 20 years, not right at 20 years.  This is something that can be easily checked.

Now a few words about 9/11.  It is completely understandable that police officers and firefighters rushed to the scene, and suffered death and injury during the collapse and resulting attempts at rescue.  That’s what they do, and why they seek those jobs.

At some point, however, it became clear that no one was left alive in the wreckage, and the task was recovering bodies, including the bodies of police officers and firefighters, and not saving the living.  At that point, someone should have made sure that no one went near the smoking pile without enough protective gear to ensure the fumes and dust did not damage their lungs.  Even if that meant the rubble was left to burn itself out for months before anyone went near it.

Given the emotions of the time, and the fact that the friends and family members of many firefighters were in that wreckage, if Mayor Giuliani, Governor Pataki, President Bush, or EPA Administrator Whitman had taken that stand and made it stick they would have been hated.  Just hated.  And they would have received no credit for the ill health that didn’t happen later.  It would have been a crushing blow to their political careers.  So the feckless route was taken.

How does that non-decision look now, as a rising share of NYC firefighters are retiring disabled?  What does it mean to those firefighters, their families, and the city’s finances?  And how about this aspect? The number of victims Al Qaeda can claim keeps going up.

As it happens, the moral courage that would have been required to make damn sure that no one else was injured in the wake of 9/11 is similar to the moral courage that would be required to avoid an even worse pension disaster in NYC.  Despite the fact that the city is fiscally wounded by the generational attacks of the past, it would have to do for the NYC Teachers Retirement System and the New York City Employees Retirement System what it has already done for the smaller NYC Police Pension Fund Article II and NYC Fire Department Article 1B Pension Fund.  Get the taxpayer contributions up to 100 percent of benefits paid and keep them there, increasing each year as benefit costs soar, until the funds recover – even given a realistic investment returns.

As it happens there are two articles that everyone should read.  The first concerns the California Teachers’ Retirement System (CALSTRS).  Rather than pretending there is no problem, that system has shifted to asking for more money.  So it can avoid becoming as deep in the hole as the New York City teachers’ retirement system.

California in 2014 is in the same position as Detroit and Chicago were in 1994. The California State Teachers’ Retirement System, CalSTRS, has built up a large deficit and has asked Gov. Jerry Brown and the Legislature to authorize a cash injection of $240 billion over the next 30 years, starting with $4.5 billion per year now.”

There is no debate over whether CalSTRS needs the money. In fact, financial economists think CalSTRS needs more than it’s asking for. But here’s the problem: Even if Brown and the Legislature continue to ignore CalSTRS for now, nothing visibly bad will happen for more than a decade. This is because CalSTRS has plenty of money with which to meet retirement promises for now.”

When CalSTRS’ reservoir runs out, some cynics hope school districts will simply declare bankruptcy in order to reduce or void the pension promises. But that’s obviously cruel and unfair to teachers who rightfully expect the promises to be met. Also, the state could be required to back up the promises, which would devastate the state budget at that time.”

So, do they cut services and raise taxes even more, after having already done so during the recession, to avoid a disaster later?  For those who believe California is a basket case, consider that New York City’s high taxes for pension contributions and level of pension underfunding are the very disaster some are pushing for California to avoid.  Meanwhile, in Illinois they have suddenly realized what the debts and unfunded pension costs of the past mean.

Pension math is relentless, tyrannical: Chicago pols and union officials knew they were committing tomorrow’s taxpayers to pension costs that could grow astronomically over time. But since their pension hikes likely couldn’t crush City Hall (or taxpayers) for a few decades, they were protected by the needn’t-be-spoken blood oath of IBD, YBD: If pension costs explode, so what? I’ll be dead, you’ll be dead.”

The sorry legacy: Today almost every property tax dollar goes not to services, but to runaway pension and debt costs. Yes, downtown Chicago does look beautiful — as beautiful as your home, too, could look if you expanded your mortgage debt indefinitely and consequence-free.”

The net result over time, as City Hall deepens its liabilities yet delays retiring them, has been a massive theft of wealth in dollars by the billions: government leaders robbing their children and grandchildren, the putative taxpayers of tomorrow. If, that is, those young people stay in Chicago.”

This serial larceny — our priorities are so worthwhile today that you, the yet unborn, must be made to pay for them — ought to embarrass politicians who boast that City Hall serves the needs of children. The debts we are bequeathing to future Chicagoans expose those platitudes as cruel lies.”

Since Chicago’s incorporation in 1837, no generation of public officials and enabling voters has so hamstrung the next generation with such an abysmal inheritance.  Those future Chicagoans, and whatever employers remain to hire them, risk inheriting exorbitant debt burdens, and probably exorbitant taxation, for which they will have received … no services whatsoever.”

Oh yes, NYC’s debts have soared as well.  And you see the same values at the federal level.  So what do the heads of our unions say?  Are they going to act responsibly, like (belatedly) those who control CALSTRS?  Or will they demand even more now buy shifting more of this burden to later?  Screw the next generation of their own members by seeking even lower pay and benefits for them, to pay for what was taken by those cashing in and moving out?  And how about Mayor-elect DeBlasio?