One Small Step

Pension Reform Agreed Upon,

But Will the Promises Be Kept?

By Henry J. Stern
October 28, 2011

The city's antiquated pension system has long been in need of streamlining and updating. The agreement reached yesterday by Mayor Bloomberg, Comptroller Liu and leading labor unions provides hope that 2012 will be a year of pension reform, but such hopes have previously arisen and been dashed on the rocks of political reality.

New York City employees have different pension plans, all under the management of the City Comptroller: the Employees' Retirement System (NYCERS), the Teachers' Retirement System (TRS), the Police Pension Fund Subchapter 2, the Fire Department Pension Fund Subchapter Two, and the Board of Education Retirement System (BERS). Each pension fund is financially independent of the others and has its own board of trustees, which include city officials and relevant union leaders. In general, the city and the unions have roughly equal authority over the funds.

Sometimes the city and union leaders work jointly on pension matters, while at others they are in disagreement, a difference largely based on the relationship between the mayor and the comptroller at the time.

Historically, the city's mayors and comptrollers have been at odds more often than they have been united. The comptrollership has been used as a stepping-stone for mayoral candidates and under those circumstances it is not uncommon for the mayor and the comptroller to disagree on issues.

The last comptroller, Bill Thompson, left office in 2009 after a close but unsuccessful effort to defeat Mayor Bloomberg's bid for a third term. The subsequently disgraced and convicted Alan Hevesi sought the mayoralty in 2001, but ran a poor fourth in the Democratic primary, losing to Mark Green, Freddy Ferrer and Peter Vallone, who all lost to Bloomberg.

Liz Holtzman was defeated for reelection as comptroller in the 1993 Democratic primary by Hevesi, who raised integrity issues against her. She never ran for mayor, but was defeated as the Democratic nominee for U.S. Senate in 1980 by Al D'Amato and in the 1992 Democratic Primary for Senate by Robert Abrams. Her predecessor as comptroller, Harrison J. Goldin, made a bid for the office in 1989, finishing fourth in the Democratic primary behind Richard Ravitch (3rd), incumbent mayor Ed Koch (2nd) and David Dinkins, the eventual mayoral winner. Goldin had succeeded Abe Beame, the only comptroller in City history to ascend to the mayoralty since Consolidation in 1898.

It is one thing for public officials to disagree on a policy issue, a frequent occurrence, but another to be in chronic dispute on questions of investment and expenditure of public funds, in situations in which the outcomes can result in financial gaps of millions of dollars in return on investments. The hydra-headed current system leads to such results.

The relationship between third-term mayor Mike Bloomberg and first-term comptroller John Liu has been particularly chilly. Although they cannot run against each other in 2013 they clearly have different visions as to what the city should do in the interim.

Liu has been in full-fledged campaign mode for the 2013 Democratic nomination for Mayor from the day he took office 22 months ago. His initial act was to publicly decline a mayoral invitation to lunch on his first day in office, which, though not substantial, set a tone of antagonism over a non-issue. There are other issues, great and small, where the two men have differed. One chronic bone of contention deals with the comptroller's issuing reports faulting the conduct of a mayoral agency. The press asks the mayor to respond, and he generally does.

Whatever justification for a particular dispute it seems clear that the mayor and the comptroller are often on opposite tracks in their judgment of the city's financial crisis and the way for it to dig itself out of the mess. The mayor sees the solution as based on reducing expenses and increasing renevue with an economy that gets better, while the comptroller believes the city can survive the recession by continuing to spend as it has done in the past.

Of course, all this may change in the next few months, since new economic data is constantly arising and influencing the stock market, corporate earnings, and tax receipts. The financial situation may improve, or deteriorate.

The tentative agreement reached yesterday between the mayor and the comptroller will require considerable fine-tuning in addition to approval by the State Legislature in Albany. It is by no means complete and dispositive of the main issues that have arisen. It does indicate a desire to reach common ground and the recognition that the city's urgent and continuing fiscal troubles require more savings to be made without endangering the pension system.

Some watchers believe that the decisions announced yesterday are not real, but a paper gloss over a more severe situation designed to buy a few months breathing room in which city and state officials will work out a more comprehensive reform. Of course, if the financial situation improves over the next several months to the extent that these measures will not be fully required, so much the better.

The working agreement announced yesterday will require the relinquishment of some authority by the comptroller, who now possesses almost plenary authority in making investment decisions for the $120 billion that remains in the city's pension accounts. It is a rare for public officials to spontaneously limit their authority in any way, unless they are required to do by law enforcement or other external authorities.

Liu has been under fire in the press in recent weeks for alleged fundraising irregularities, including taking campaign contributions from certain donors under the name of others in order to increase the amount of matching funds he would receive from the city's Campaign Finance Board. If he made concessions as the result of current political weakness, it remains to be seen whether he will adhere to them when his own situation improves.

It should always be remembered that every high political office is but a few steps from the grand juries' chambers in the county court houses. The higher one rises in the system, the more vulnerable one is to accusations of various types of misconduct.

The trouble is, as we say in Rule 32, that some of the charges are likely to be true.