Every private-sector worker in New York State right now owes more than $19,000 on false retirement promises to public employees. And state leaders can't even come up with minimum payment on the debt. So they floated the idea of borrowing $6 billion from the pension fund to help "balance" the budget.
It’s the stranded cannibal option. New York State politicians deny they’re like cannibals on a desolate island. Stranded cannibals always have something to eat. For awhile.
Now it looks like they just want to nibble at – that is, amortize — their pension fund obligations to balance the budget.
Despite squeezing $2 billion more out of taxpayers than they did just three years ago, state leaders are not satisfied merely feasting on the rotting corpse of the Empire State economy.
They proposed devouring $6 billion of their own pension fund substance to help “balance” a projected $9.2 billion deficit in a budget they must pass in less than two weeks.
It means their evaporating victim pool of private workers and businesses will have to pay more and more and more forever as state spending – much of it hidden for almost a decade – locks into irrevocable increases and growing debt that always must exceed any conceivable taxing capacity and economic growth.
Meanwhile until it all crashes they and their cronies will continue to skim fat off the boiling cauldron of hopeless misery into which they plunged taxpayers and state workers.
Here’s the deal: Politicians and millionaire union bosses have betrayed state workers on billions of dollars in false promises of retirement benefits.
They based contributions on an assumption of risk-free 8 percent investment returns every year forever. Based on that promise, they now are $86 billion short.
Even though some outside experts rated the pension funds as fiscally solid before they took a $40 billion hit last year, the Government Accountability Office reported the state owed workers $51 billion in unfunded retirement health care promises as of 2008. It’s only gotten bigger since.
Combined that’s at least $137 billion that New York State taxpayers owe public employees right now. That’s about $19,571 per private-sector worker, according to latest data from the Bureau of Labor Statistics.
Also right now, optimistically, the minimum annual payment just to try to keep up is only about $1.6 billion, and politicians can’t come up with that. They're now proposing amortizing $250 million of it.
If they miss the payment, it goes on next year’s bill with interest, so the tab just keeps going up.
The state does not have the money now. It won’t have the money next year. It never will.
What do officials propose? Borrowing the $6 billion. But from where? Who would be stupid enough to loan $6 billion to a bankrupt deadbeat state? Nobody.
So they floated the idea of borrowing it from the pension fund. That’s right, citizens. They want to borrow from the pension fund to pay the pension fund.
And while their official liability is based on getting an 8 percent risk-free return forever, they want to pay only 4-5 percent interest on the loan.
Taxpayers, of course, will make up the difference. Judges – who happen to be covered by public pension plans – have ruled repeatedly that pensioners shall be paid first whether the state is broke or not.
Now that borrowing from the pension fund has generated a firestorm, officials are talking about just carrying what they owe on the books and amortizing the amount. That’s the difference between a stranded cannibal gorging on himself and just nibbling discretely.
Even though taxpayers have to carry more than 1,400 retirees at $100,000-plus annual pensions and dole out more than $340 million a year in fees, administration and other costs, the average retired state or municipal employee only gets $17,000 to $37,000 a year.
New York officials have come up with a system that manages to pay hopeless retirement benefits to many while enriching a few and indenturing taxpayers forever.
No wonder thoughts of fiscal cannibalism seem reasonable to them.
Frank Keegan is a national editor for The Franklin Center on Government and Public Integrity. [email protected]