Update: Teacher Pensions in New York and New Jersey

Note:  a new post has been written with updated data on NYC teacher pensions through 2016.  It is located here.

https://larrylittlefield.wordpress.com/2017/07/29/long-term-pension-data-for-new-york-and-new-jersey-to-2016-teacher-pensions/

Late last year I downloaded and arranged all the data the U.S. Census Bureau had collected since 1957 on currently active public employee pension plans in New York and New Jersey. I used the data in a series of posts: one on the teacher pension plans, one on police and fire pension plans, and one on the pension plans for everyone else. To say the posts are popular is an understatement. Since I started “Saying the Unsaid in New York,” last year’s post on teacher pensions has the most views, with the police and fire pension post second and the general pension post fifth. Even during the last 90 days, long after the posts were written (and a period when I put up three series of other posts based on three other databases I compiled), the old teacher and police/fire pension posts have been first and third in views.

The Census Bureau has now updated his information for FY 2012 (and for the NYC police pension plan, which lags, for FY 2011), and I have added the new information to the spreadsheets with the charts. Not much changed between FY 2011 and FY 2012, though I have added a few additional charts to better show what I already showed last year. So the reader may find much of what will follow duplicative. What is worthy of additional comment, however, is the political reaction to the public employee pension disaster over the past few months. The updated charts and commentary for teachers may be found below.

The pension disaster has been caused by a combination of retroactive pension increases scored by the public employee unions in deals with politicians, and taxpayer underfunding of the pensions that public employees had been promised to begin with, back then they were hired. The distribution of the guilt varies from place to place. Those who believe in fairness and justice might expect an inquiry to see who did what to whom, with the distribution of the sacrifices apportioned accordingly. Instead we see the opposite – the same distribution of political power and lack of human decency that led to the problem in the first place is also determining who is being made worse off, and to what extent.

The original post on long-term data for the Teachers Retirement System of New York City, the New York State Teachers Retirement System, and the New Jersey Teachers Pension Annuity Fund, may be found here.

https://larrylittlefield.wordpress.com/2013/12/08/teacher-pensions-the-road-to-ruin-in-new-jersey-and-new-york-city-but-not-yet-the-rest-of-new-york-state/

The updated charts for teachers are in this spreadsheet, with tabs at the bottom.

Long Term Teacher Pension Charts NYC NY NJ

The entire updated database is, once again, in this spreadsheet.

https://larrylittlefield.wordpress.com/2014/06/22/public-employee-pensions-in-2012-2002-and-1993-census-bureau-data/pension-data-long-term-ny-nj-2/

The first chart shows the effect on NYC teacher pension fund benefit payments of the pension “incentives” of 1991 and 1995, the retroactive pension increase of 2000, and the retroactive pension increase/early retirement deal of 2008. When they were hired NY’s teachers were promised a half pay pension at age 62 after working 30 years, with a 3.0% employee contribution and no inflation adjustment after they were retired. That’s what money had been set aside to pay for, though perhaps not enough of it. But thanks to all the deals, many retroactively received a pension at age 55 after working just 25 years, with a 3.0% contribution for the first 10 years alone and no contribution or 1.85% afterward, and an annual inflation increase on part of their income – even if the inflation rate is zero.

Chart 1

All these deals were described to an ignorant public as “costing nothing” or “saving money,” but each caused inflation-adjusted pension benefit payments to soar. In 1992, as a result of the 1991 early retirement incentive, pension benefit payments from the New York City teacher pension fund increased 33.7%, adjusted for inflation. The 1995 early retirement inventive and retroactive pension increase led to a 37.0% increase in inflation-adjusted benefit payments by the NYC teacher pension fund over two years in 1996 and 1997.

The massive 2000 retroactive pension increase, which adjusted pensions upward for inflation for past retirees as well as future retirees, caused a 27.0% increase in payouts by the NYC teachers’ pension fund in excess of inflation over four years from 1999 to 2003. The increase was 51.7% from 1999 to 2000, but a subsequent decrease from year-to-year implies there was a large, one-time payout under the deal.

The 1990s stock market bubble was used as an excuse for pension increases around the year 2000. Wall Street would pay for it all leaving taxpayers and service recipients unaffected, it was claimed. But the United Federation of Teachers scored one more huge retroactive pension increase in 2008, eight years after that stock market bubble started to deflate (and a few weeks before Bear Sterns went under, starting the deflation of an echo bubble caused by low interest rates). That deal led to a 32.1% increase in inflation-adjusted payouts by the NYC teacher pension fund from 2008 to 2010, with more to come as those who benefit from the deal continue to retire years earlier than they had been promised – or for more money as a result of staying later than is now required.

Compared with this previously reported history not much happened in FY2012, with payouts by the NYC teacher pension fund rising by 1.0% more than inflation. But the damage has been done. The New York City teacher pension fund was only 55.6% funded in FY 2013, according for the Center for Retirement Research at Boston College.

http://crr.bc.edu/wp-content/uploads/2014/06/slp_39.pdf

What the United Federation of Teachers has manipulated the politicians into doing is basically repeat the retroactive pension deals of the Lindsay Administration in the 1960s, which had previously caused pension costs to soar and wrecked the city’s schools in the first place.

But there are critical differences. In the 1960s many private sector workers also had generous pensions, and average private sector pay levels had been rising. NYC teachers may have rightly felt that they were only demanding what many other workers had already received. Since then, however, pay and pensions have been going down for nearly all private sector workers, recently even including Wall Street. And this time, with the benefit of hindsight from last time, the UFT knew repeating the deals would cause pension costs to soar and wreck the schools again. It isn’t an accident or a mistake when you do it twice.

With this history, and with lots of classroom cuts (and cuts to other services) in recent years to pay for the soaring costs of NYC teacher pensions, one might have expected a little humility out of the UFT. Instead we get entitlement. A demand for $5 billion in back pay. And a new contract that provides huge payouts for those cashing in and moving out (thus inflating their pensions), but no relief for younger and future teachers, who had their take home pay and future pensions cut as part of a new pension tier for new hires that is part of an effort to get the pension funds out of the hole. Those who grabbed the hugely costly retroactive pension deals in 1991, 1995, 2000 and 2008 gave back nothing, and do not believe they own anyone anything. The UFT has basically treated other New Yorkers, and even their own younger and future members, with contempt.

Chart 1b

Although the NYC and NY State teacher pensions were controlled by the same New York State Legislature, somehow the state teacher pension plan didn’t take the same hit. In 1992, when pension benefit payments for retired NYC teachers jumped 33.7% in real dollars, the increase for the rest of the state was just 12.6%. From 1995 to 1997, the increases were 37.0% for NYC and 22.6% for the rest of the state. The 2000 retroactive pension increases did have a big effect on the NY State teacher pension fund. From 1999 to 2003 payouts by that fund increased by 44.8% more than inflation.   But the 2008 UFT pension deal did not affect teachers in the portion of New York State outside New York City, and there was no spike in payout from the state fund at the time.

Somehow the teachers in the rest of the state have been less rapacious than those in New York City. Or New York State politicians, believing that children in the rest of the state deserve an actual education, have been less willing to gut the schools there to benefit those cashing in and moving out. Or perhaps teachers in the rest of the state were less interested in doing the minimum amount of work possible for the minimum number of years, and were less likely to take full advantage of all the early retirement deals. A cousin who recently retired as a police officer told me recently that where she worked all the cops stayed for 30 or 35 years, while NYC cops all left after 20. Perhaps NYC teachers, and teachers elsewhere in the state, have the same attitudes.

Regardless of the reason, the lower cost of retroactive pension deals in the rest of New York State has led to a lower level of pension underfunding. According to the Center for Retirement Research, the New York State Teacher Retirement System was 87.5% funded in FY 2013. Not great, but not (yet) a disaster. In fact, the NY State pension funds are among the best funded in the U.S.

Chart 1c

New Jersey may have also had a pension incentive in 1991, with a 16.3% increase in benefit payments from its teacher pension plan (adjusted for inflation) in 1992, but there was no other huge one- or two-year increase in the mid-1990s. Like most parts of the U.S., New Jersey enacted a retroactive pension increase during the peak of the 1990s stock market bubble, and from 1999 to 2003 payouts by the New Jersey teacher’s pension fund increased by 49.2%. But there was no subsequent pension increase in 2008, as there was for New York City teachers.

Based on this history of lower increases in inflation benefits, one might have expected the New Jersey teachers’ pension fund to be in better shape than the New York City teachers’ pension fund. According to the Center for Retirement Research, however, the New Jersey’s teachers’ pension fund was only about 57.1% funded in FY 2013. And that is given the high future investment returns assumed by New Jersey, in excess of even the excessive assumptions of New York City.

While the United Federation of Teachers and its deals for those cashing in and moving out bear most of the blame for the pension disaster in New York City, it is past taxpayers and those politicians who pandered to them who get most of the blame in New Jersey.

Chart 2b

With the exception of a disastrous “pension bond” deal pushed through by then-Governor Christie Whitman in 1997, and a couple of years during the Corzine Administration just before the Great Recession, New Jersey taxpayers have contributed virtually nothing to the state’s teacher pension system since the early 1990s. That’s more than 20 years of promising benefits and not paying for them. Meanwhile, New Jersey teachers have made substantial contributions to their own pensions, recently in excess of $500 million per year.

Inheriting disaster and calling the failure of taxpayers to pony up in the past “ancient history” with regard to obligations in the future (in a 60 Minutes interview), current Governor Chris Christie rammed through a pension reform early in his term. The teachers themselves were expected to contribute more to their pensions, and the automatic annual pension increases under the late 1990s retroactive pension increase were halted. In exchange, the state promised to gradually start making the (underestimated) necessary taxpayer pension contributions. Forcing current and future taxpayers to sacrifice to pay what past taxpayers had done.

Incredibly, however, when the time came to pay Christie refused to make New Jersey taxpayers and service recipients suffer as required to keep the state’s side of the bargain, in effect failing to live up to his own deal. “Christie, 51, says he’s paying for the decisions of past administrations that left the pension system underfunded by $52 billion. The alternative is to cut spending for schools, education and social programs, he said.” He is paying? It sounds like the most important aspect of this disaster is its effect on his own career. In reality, however, were it not for the malfeasance of Christie’s predecessors he never would have been elected in the first place, and never would have had the national prominence he briefly enjoyed.

As in New York City those most responsible for causing the problem, in this case New Jersey taxpayers, refuse to make any sacrifices and have the political power to shift the sacrifices to others. As in New York City, in fact, those who benefitted in the past are moving out of the state in droves, so they won’t have to pay in the future. In New Jersey, however, fewer suckers are moving in.

Chart 2

Meanwhile in New York City, perhaps all the retroactive pension deals and incentives for New York City teachers were described as “costing nothing” or “saving money” because they were not paid for at the time. With the possible exception of a large contribution in FY 1992, possibly a pension bond intended to offset the cost of the 1991 retroactive pension deal, there were no huge increases in taxpayer dollars coming into the NYC teacher pension fund during the 1990s and early 2000s to offset the increase in money going out. Those increases would come years later, when the pension plan was already in a death spiral.

Since 2002, New York City taxpayer contributions to the New York City teachers’ pension fund have soared, leading to cuts in the classroom despite a series of tax increases and a shift of funds to education from other services. Indeed, nowhere else in the U.S. are taxpayers sacrificing more to put money into public employee pension funds, as I showed in by analysis of public employee pensions across the 50 states.

https://larrylittlefield.wordpress.com/2014/06/22/public-employee-pensions-in-2012-2002-and-1993-census-bureau-data/

In fact the city taxpayers have contributed substantially to its teacher pension fund every year other than 2000 and 2001, when the Giuliani Administration got permission from the unions for the city to temporarily put in less. In exchange for the employees permanently putting in less. When it comes to pension contributions, New York City taxpayers are number one.

While services are being cut and taxpayers are putting in more, NYC teachers are putting in less.   As part of the 2000 pension deal, the part pushed by Giuliani, the 3.0% of pay employee contribution to the pension plan was eliminated for those with 10 more years’ seniority. Since it is those with seniority to earn most of the money, I have estimated that lifetime employee pension contributions by NYC teachers were cut by 75.0% by that deal. And from FY 2002 to FY 2003, pension contributions by NYC teachers to their own pension fund decreased by 84.0%, to less than one-sixth their prior level, after adjustment for inflation.

Given the power of the public employee unions compared with other New Yorkers in New York City and State government, and the unions’ policy of sacrificing future hires (who are then less qualified and motivated) to benefit those cashing in and moving out, the union and politicians have stuck new NYC teacher hires with vastly a vastly higher contribution rate of 5.85% of their pay for their entire career. Since younger teachers earn little relative to older teachers, and more existing teachers reach the 10-year threshold and stop contributing each year, however, contributions by NYC teachers to their own pension fund remain rock bottom, and will stay there for years.

“Pro-union” mayor Bill DeBlasio had a chance to reverse some of these inequities among teachers in the nine-year NYC teacher contract just concluded. He could have insisted that the majority of available money be set aside for higher cash pay for younger and future teachers during the first two-thirds of their careers, offsetting the richer pensions and lower contributions past teachers received. That could have evened out total career compensation.

Instead, DeBlasio agreed to allow those teachers retiring immediately to walk away with $40,000-plus in back pay for wage increases during the recession, a period when most New Yorkers got little or no wage increases at all. So now, based on the lower pension benefits and higher contributions of new teachers, the United Federation of Teachers will once again claim New Yorkers deserve inferior schools because teachers are underpaid. At a total average cost in wages and benefits of $272,500 per 20 students in FY 2012, and more today.

What else has happened recently? In FY2012 NYC taxpayer contributions to the NYC pension fund were cut, relative to what they had been the year before, by $632 million. Despite how deep in the hole the NYC teacher pension fund is. Where did the money go? To an increase in pension contributions to the New York City Employees Retirement System (NYCERS) which covers most city workers (other than teachers, police and fire). Evidently an unwillingness to impose the full level of required tax increases and service cuts on New Yorkers until later means the politicians are unwilling to fully fund all the pension funds at the same time. So they just shuffle money around between them.

Chart 2a

While the New York City teacher pension fund is underfunded despite decades of relatively high taxpayer payments (and, offsetting this, very high taxes and bad schools), the New York State teacher pension fund is relatively well funded despite taxpayer contributions that dropped close to zero around the peak of the first stock market bubble in 2000. And despite contributions by teachers in the rest of the state that have been negligible as well. The New York State teacher pension fund is reaping the benefits of lower past increases in payment payouts compared with New York City, and greater taxpayer contributions compared with New Jersey.

Recent actions by New York State, however, imply that (as in New Jersey) taxpayers in the portion of New York State outside New York City are unwilling to pay as high a percentage of their incomes in taxes, and settle for the low quality public schools, that New York City residents have been forced to accept since the first batch of retroactive pension increases under Mayor Lindsay in the late 1960s. And rather than impose those sacrifices on the rest of the state, the state government (led by Comptroller Thomas DiNapoli) has allowed school districts to pay their increasing pension contributions with money borrowed from the teacher pension fund itself. Even though the burden of those pension contributions on the rest of the state has not yet reached the level it faced previously in the 1980s, let alone what New York City has been forced to accept by the United Federation of Teachers. This “smoothing” policy, if continued, will lead to a pension disaster like the one faced by New York City and New Jersey. And it has already been extended once.

Chart 6

The chart above shows the ratio of taxpayer pension contributions to pension benefit payments for the New York City, New York State, and New Jersey teacher pension funds. The data shows that the city’s taxpayer pension contributions, relative to its payouts, were lower than those for the New York State plan (the presumed pension bond of 1992 aside) for most of the 1980s and 1990s. Until the late 1990s and early 2000s, when the state pension plans became just as irresponsible.

There are two reasons for high taxpayer pension contributions relative to pension benefit payments: a need to catch up after past retroactive pension increases and underfunding, and a high level of active employees relative to retired employees.

Rapidly growing areas, such as the suburbs in the Baby Boom era and the Sunbelt from the 1970s through the 2000s, have a high ratio of working teachers to retired teachers. The low number of retired teachers reflects the past, when the population was far lower. Even in New York City, however, there was an increase in the ratio of active to retired teachers in the 1960s and early 1970s, after the baby boom generation flooded the city’s schools.

Pensions are supposed to be pre-funded, so a high ratio of working teachers to retired teachers should mean a high ratio of pension contributions to benefit payments. With today’s high contributions paying for tomorrow’s high benefits. With few existing retirees claiming benefits, however, fast growth areas can temporarily enjoy a long period of relatively low taxes and extensive public services by underfunding pensions. Later, when an area is built out, the number of taxpayers stops increasing, and the larger number of public employees who provided them with services begins to retire, pension costs soar. Retroactive pension increases, which by definition are not pre-funded, just add to the disaster. Older central cities with their own separate pension funds, including New York, experienced that disaster in the 1970s, after their populations peaked in 1950. Many suburban areas such as New Jersey are facing it now.

Chart 3

This chart shows the ratio of active pension plan participants (mostly working teachers) to those receiving periodic payments (mostly retired teachers). As the data shows, the 1970s fiscal crisis forced cutbacks in the number of New York City teachers, and the entrance of the baby bust generation into school caused enrollments to fall. The number of active members of the NYC teacher pension fund fell from 105,000 in FY 1972 to 79,200 in 1976.

Neither New York City, nor the rest of the state (with teachers in the NY State pension plan), nor New Jersey have been rapid growth areas since 1990. The ratio of working teachers to retired teachers fell, and then leveled off in NYC and the rest of New York State. Without underlying population growth to pump up the number of active teachers to retired teachers in the short run, we now see what the number of years of required work and retirement age for teachers, and current life expectancy levels, really mean. Less than 1.5 years worked by NYC teachers for each year paid to be retired, just 1.8 for teachers in the rest of New York State, and just 1.7 in New Jersey.

Moreover, for those NYC teachers who took maximum advantage of the deal to allow them to retire at age 55 after just 25 years of work, the ratio is probably one year worked (or less) for each year paid to be retired. The overall ratio is higher because of teachers who leave the profession before becoming eligible for pensions, and those who work beyond the minimum service time and/or age (thereby increasing their pension benefits beyond the 50.0% of pay of pay tax-free).

Chart 4

This chart shows the number of active, retired, and “inactive” members of the New York City teacher pension plan. Inactive members have earned and retained pension credits, perhaps up to the number of years required for a full pension, but have yet to start collecting, perhaps because they have yet to reach the minimum age.   After being so low as to generally not be tracked before 2009, the number of “inactive” members soared in 2010. Was this a data error? Or did the 2008 25/55 deal allow a large number of teachers to leave teaching after 25 years of service, but before age 55? If the latter, this will lead to an explosion of pension benefit payments as those “inactive” plan members reach age 55 and start collecting pension benefits, further draining the NYC teacher pension fund.

Note that the 2008 deal required NYC teachers to contribute an extra 1.85% of their pay to the pension fund in exchange for being allowed to retire five years early. But the extra contributions only began in 2008. If a teacher was eligible to retire immediately, they just left and paid nothing extra. And if a teacher left the city schools with enough service time to retire but not yet at age 55, they also paid nothing more.

The update? Press reports indicate that the number of NYC teachers retiring soared after the new United Federation of Teachers contract was signed, because it allowed those who retired by June 30, 2014 to receive a huge lump sum payout that would further increase their pensions.

http://www.capitalnewyork.com/article/city-hall/2014/07/8548421/teacher-retirements-spike-wake-uft-contract

It is no surprise that the DeBlasio Administration chose to hand even more over to those cashing in and moving out, because as a result of the Federal Reserve’s sub-zero interest rate policy stock prices have once again temporarily soared relative to corporate earnings and dividend payments. Since pension fund actuaries allow pension funds to take credit for the temporarily higher asset values in such bubbles, but do not require the expected rate of return to be reduced to match the associated low level of interest rates and low dividend yield, the ratio pension benefit payments to asset values temporarily increases in bubbles. And this happened in FY 2012 for the NYC pension funds, as shown in the next chart.

Chart 5

Even with that improvement, however, benefit payments by the NYC teacher pension fund equaled 13.1% of pension fund assets in FY 2013. There ought to be enough pension assets in the New York City teacher pension plan to pay for all of the future pension benefits of teachers and related workers who are already retired, most of the future pension benefits of those soon to retire, and some of the future benefit payments of younger teachers. But FY 2012 benefit payments were high enough to wipe out the NYC teacher pension fund in just 7.6 years.

Unless is the plan is to leave no assets to pay for the retirement of future teachers, moreover, pension benefits should be paid for with actual cash earnings, not temporary paper gains. In FY 2012 the NYC teacher pension fund paid $4,487 million in benefits. It earned $561 million in interest, $707 million in dividends, and $33 million in other actual cash earnings for a total cash return of just $1.3 billion. The cash coming in from investments was just 29.0% of the cash going out in teacher pension benefits.

All the other “earnings” that made the NYC teacher pension fund seem better funded were just paper gains caused by a temporary increase is asset prices. When interest rates rise back to normal, the value of existing stocks and bonds will collapse (but it may then be become possible to perhaps have pension fund earnings at the 7.0% now assumed — from those lower asset values).

The situation of the New Jersey teacher pension fund just as dire, as it paid out 13.9% of its assets in benefit payments in FY 2012, or one dollar in seven. The Center for Retirement Research reports that the NJ teacher pension fund in slightly better funded than that of NYC, but only because the CRR simply accepts New Jersey’s assumption of a higher future rate of return on its dwindling assets. But New Jersey, like NYC, has been forced to sell off assets to pay benefits, and the future expected return on nothing is nothing.

The New York State teacher pension plan, covering teachers in the rest of New York State, is hardly in great shape. Its benefit payments equaled 6.9% of its assets in FY 2012, up from 6.4% in FY 2011. While that is not yet a disaster, one can see the trend caused by the decision to “smooth” and defer costs to the future. The consequences of this are not likely to be admitted to for some time.

As noted in my prior post on this dataset, I had long wondered why the NYC teacher pension fund was so much worse off than the NY State pension fund, even though since the Taylor Law of 1967, the same New York State legislature that has set the pension benefit levels for both. One theory was that the city pension funds never really recovered from the Mayor Lindsay deals of the late 1960s. But it turned out that based on the ratio of pension benefit payments to assets, the two funds were in rough parity in 1990, before the current era of retroactive pension increases. The two funds have diverged since then, mostly due to more frequent and more costly retroactive pension increases in New York City.

Chart 7

Finally, the chart above shows the annual return on the assets of the New York City, New York State, and New Jersey teacher retirement funds. Before 2002 the Census Bureau tabulated pension plan assets by book value, but starting in 2002 market value has been the measure, leading to more reported volatility.

As I noted last December, from 1991, after 1990 when the city plans had finally gotten out of the hole, to 2011, the average annual return on the New York City teacher pension fund was 7.9%, compared with 9.5% for the New York State teacher pension plan and 9.0% for the New Jersey teacher pension plan. These high returns for all three plans reflect an investment era that was more bubble than bust, and higher inflation than is present today. Future investment returns are likely to be much lower.

One of the claims unions make with regard to the pension crisis is everything would have been fine if Wall Street didn’t steal all the money. But the long run data show that the actual rate of return met or exceeded the anticipated rate of return during the period covered, so long term investment returns had nothing to do with the current crisis. In reality, whichever interest was more powerful — past taxpayers or public employee unions raiding on behalf of those cashing in and moving out — has simply used each stock market bubble as an excuse to take more. Leaving whoever is less politically powerful, organized, or just less greedy to pay the price when asset prices correct back to normal.

That said, the underperformance of the NYC teacher pension fund over the long run has been substantial, and the effect of that underperformance will be far more damaging in the current low return era. It is one thing to assume a 7.0% rate of return from 1991 to 2000, an 8.0% rate of return from 2000 to 2011, and a 7.0% from 2011 on, and have an average return of 7.9%. It is far worse to continue to assume a future 7.0% return, have other pension funds average 5.0%, and have the NYC pension funds average 3.5%.

Just remember, the investments by New York City pension funds are decided by union-backed NYC Comptrollers and boards filled with union appointees. The unions and Wall Street are fleecing NYC taxpayers and service recipients together. Moreover, the pension funds have shifted to “alternative investments” with no published values. This will further aid their ability to hide pension losses until Generation Greed has died off and/or moved away.

The good news is that in FY 2012, the NYC teacher pension fund’s rate of return was 3.1%, compared with 2.9% for the NY State teacher pension fund and minus 2.4% for New Jersey. There has been more bubbling up of stock prices since then, thanks to Federal Reserve interest rates (in effect) less than zero.

But the dividend yield – the actual cash return on the S&P 500 based on current asset values – is down to 1.9%.

http://www.multpl.com/s-p-500-dividend-yield/

That’s the current rate of return on stocks in actual money. To get back to the long-term average of 4.42% without higher dividend payments, the price of the average stock would have to fall by 57.0%. Even for the dividend yield to get to 3.0%, hardly a huge rate of return (but one that might convince me that investing my own retirement savings in stocks was likely to be a disappointment rather than a disaster), stock prices would have to fall by about one-third.

I’d say “you heard it here first,” but actually everyone in even slightly in the know already knows this. Many are out or mostly out, but others are just riding the bubble expecting to get out in time and leave some greater fool holding the bag. Including all of Generation Greed, which needs to cash out of stocks to pay for its retirement, and is looking to do so at inflated prices. So who will be buying? Younger generations, who earn (on average) 20-30 percent less than those now age 55 and over? Public employee pension funds? I can’t want to see what kind of lies Generation Greed union leaders and politicians come up with once they run out of suckers and stock prices correct back to normal.

Speaking of lies, before updating my posts on pensions for other types of public employees in New York and New Jersey, I intend to put up information collected in an investigation of the 2008 pension deal for New York City teachers — blog posts and articles from around the time the deal went down.  In light of the information above, you’ll see that those involved took lying to a new level.

Advertisements

3 thoughts on “Update: Teacher Pensions in New York and New Jersey

  1. MG

    This seems like a remarkable thing you’ve put together.

    I wonder if there’s a way you can create a tighter summary/headline. I’m not conversant in “pension.”

    Maybe you’ve already done it, but if not –

    1. The old deal. A typical NY teacher in X year (1990 or whatever) could retire after X years and get a lifetime benefit of Y at roughly YY per year. If that deal was still in place, then with inflation, it’d be Z and ZZ.

    2. Today’s deal. After 3 different amendments to raise that deal, that same teacher under today’s deal, after X years of service, would get W and WW (in inflation-adjusted dollars).

    3. 401k. To compare it to a 401k, first, here is how much you’d need in your 401k to achieve WWW lifetime payout. And to understand what taxpayers are putting in, that’s like a private school teacher contributing $5000 per year, but getting an employer match of 1:1 for another $5000, getting $40,000 (or whatever).

    4. True cost. Here is how much should be set aside each year to fund it: $XXX billion.

    5. Current cash outlay. Here is how much cash is actually set aside each year to fund it: $YYY billion.

    6. Opportunity cost. If we look at #5 and ask “What would happen if we held to the old 1990 deal,” the answer is the Gov would now have $ZZZ billion per year available of free cash, possibly to spend on education.

    Send me an email if you do so!

    1. larrylittlefield Post author

      I did a series examining the cost of the pensions, and the retroactive deals, a while back, with some back of the envelope calculations.

      http://www.r8ny.com/blog/larry_littlefield/so_what_do_those_public_employee_pensions_cost_anyway.html

      http://www.r8ny.com/blog/larry_littlefield/what_do_those_pension_enahncements_cost.html

      http://www.r8ny.com/blog/larry_littlefield/the_cost_of_pension_enhancements_part_ii.html

      Here is the 401K comparison.

      http://www.r8ny.com/blog/larry_littlefield/what_would_a_pension_cost_for_you.html

      I wrote all these back in summer 2010.

  2. Pingback: The 2008 NYC 25/55 United Federation of Teachers Pension Deal: An Investigation | Saying the Unsaid in New York

Comments are closed.