New York State municipalities are suffocating under the weight of local pensions.
The solution? Defer and delay, rather than deal with the problem now.
From The Ithaca Journal, Borrowing for pension costs soar in N.Y.:
Local governments and the state increased borrowing off the state pension fund to pay yearly retirement costs by 22 percent between 2013 and this year, state records show.
As pension costs soar, 133 municipalities deferred $472 million in retirement obligations this year — a record amount, data from the state Comptroller’s Office showed. Last year, 139 employers borrowed $368 million.
Local governments said they had no choice but to enter the state’s amortization program, which allows them to essentially borrow off the state’s $161 million pension fund to pay the ongoing expense with interest over as many as 12 years….
Local governments readily admit that delaying pension costs, plus interest, isn’t great fiscal policy. They said, though, they have no alternative as they grapple with limited revenue, growing bills and a property-tax cap that restricts how much they can raise in new money.
Elmira Mayor Sue Skidmore said she’s lobbying the state Legislature to pass a law so the city can borrow through the bond market to pay its pension tab. It’s borrowing about $1.3 million through the pension fund this year as part of its total $4.6 million tab.
“We have zero in economic growth here. Sales tax revenues are down; we’re under the constraint of a tax cap,” Skidmore explained
What possibly could go wrong?
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Comments
They need to address cost-of-living and the several causes of progressive inflation. They need to address the structural disparities inherent to high density population centers. Bubble Economics only offers a short-lived perception of prosperity.
It’s unconscionable, or perhaps just stupid, that unions, especially in the public sector, are demanding and receiving progressive compensatory measures, which both obfuscate and exacerbate the underlying causes which purportedly justify their existence.
To everyone reading this in the State of New York: Welcome to East California. “There’s a new wave comin’, I warn ya.” [Kim Wilde, 1981]
Sitting here in Texas, it would be easy for me to laugh, shrug and watch with amusement while these prog cesspools collapse under the weight of their own stupidity.
However, I have a feeling they’ll go hat in hand (which means promising votes) to Washington, DC looking for a ‘bail out’ when their finances finally implode.
And then it will be us ‘makers’ who once again get to bail out the ‘takers.’
One of these times it will be ‘enough’ and the proverbial pitchforks will come out. How long till then?
Democratic leverage, both real and manufactured. Democrats, in particular, are especially exploitative and vulnerable to instability in large, diverse (i.e. dissonant) population centers where disparities are structural.
The ‘takers” will be as aggrieved as the ‘makers.’ And the fakirs who conjured the scam will likely be long gone.
Perhaps their “growing bills” could be solved by not being so damn generous with pay and perks. Perhaps they should tighten their belts when revenues are flat or down. Nah, that would be crazy!
Borrowing from the state versus issuing bonds to cover fixed benefit pensions (handed out like water by really dumb politicians keeping the unions in line). Is drowning in debt preferable to going belly up while sticking the investor class?
Long-term, any solution that fails to shut down the continuing accrual of future pension obligations is total insanity. Public unions cannot strike, so change the rules by fiat if necessary – Obama does it all the time.
We are hearing more and more of Herb Stein’s old wisdom from the ’70s: “If something cannot go on forever, it will stop,” although Stein was clearly off on his expected timelines.
Sooner or later all these states and localities will have to face the simple fact that you can never beat math; it always wins. Since most of the politicians (and the electorates) will not directly confront the pension problem, expect a growing wave of municipal bankruptcies. Bankruptcy judges and special masters cannot ignore the math, so they will rein in the pensions to a manageable level, voiding the contracts.
Whether or not states themselves can declare bankruptcy remains an open question, though.
However it goes, the day of reckoning is approaching.
“Bankruptcy judges and special masters cannot ignore the math, so they will rein in the pensions to a manageable level, voiding the contracts”
I disagree. They are working very hard to avoid that result. Look at what’s happening in California. Public pensions are essentially contracts to enslave the rest of the population, because judges won’t void them. None of the big city bankruptcy cases have resulted in the necessary pension reductions, or indeed any pension reductions so far as I can tell.
I see unsupportable pensions as a wealth transfer from New York to Florida. Future New Yorker’s wealth transferred to present-day Florida.
When the bill comes due, the population of New York will be 3 politicians, with everyone else living in a neighboring state an commuting to the city. Upstate will be (more of) a ruin.