Across the country taxpayer pension costs for public schools are soaring, and state and local taxes are being increased while money actually spent on education is being cut to pay for it. You see it in California, where a huge tax increase “for education” went exclusively to pensions, and in Illinois, where the City of Chicago’s schools are on the brink of bankruptcy. You see it in Kansas and Oklahoma. In some cases soaring pension costs are the result of past taxpayers’ unwillingness to fund the pensions teachers had been promised, promised for some in lieu of Social Security, which those teachers will not be eligible to receive. In other cases pension costs are soaring because politically powerful teachers’ unions cut deals with the politicians they controlled to drastically increase pension benefits, beyond what had been promised and funded. In many cases there is a mix of both factors.
New York City happens to be the place where the teachers’ union, the United Federation of Teachers (UFT), is perhaps the most guilty, and taxpayers are the least guilty, with regard to the pension crisis. And it the place where the burden of teacher retirement is the greatest. The result is large class sizes despite extremely high public school spending, and a host of services that New York City children do not receive. With virtually all New York politicians in on the deals that have left the New York City Teachers’ Retirement System (NYC TRS) among the most underfunded in the country, however, there has been a desperate attempt to cover up the damage. So the consequences of retroactive pension increases for NYC teachers (and police officers and firefighters) have shown up not so much in education (and policing and firefighting), but in every other public service in New York. And all of this is under Omerta.
New York City and New Jersey, like most places, have separate pension plans for teachers, police officers, and firefighters, and large general pension plans for all other public employees combined. This post is about updated Census Bureau data, for the years 1957 to 2016, for the general pension plans: the New York City Employees Retirement System (NYCERS), which also covers New York City transit workers, the New York (state) Public Employees Pension and Retirement System, which also covers local government workers (including police officers and firefighters) in the rest of New York State, and the New Jersey Public Employees Retirement System, which covers most public employees in New Jersey. In general the findings are the same as they were the last time I analyzed this data.
It has been a few years, however, so I have decided to repeat the analysis and update the charts below, and add a further discussion on hedge funds and the rate of return at the end. The data shows a pension disaster not only for New Jersey, where taxpayers have contributed very little over the years, but also for New York City, where taxes are high and taxpayers have contributed massively. The New York State system is in somewhat better shape – but in much worse shape than a decade ago.