Mayor Tackles Pensions

Bloomberg Plans Assault

On Rising Pension Costs,

Asks Koch to Lead Drive

Mayor Bloomberg's tenth State of the City speech was delivered this afternoon in a restored 1929 movie palace, the St. George Theater, named for the old neighborhood, an historic district close to the Staten Island ferry. A spinoff of the President’s State of the Union message, the State of the City is an annual ritual which, in prior years, has told listeners about the city’s condition, often as the administration at the time wished it to be.

You can click on the text of the Mayor's remarks here. If you prefer to watch the speech, click here. The video is an hour long.

The speech was well prepared and forcefully delivered, indicating that the Mayor is regaining his groove after a recent series of unfortunate events which are chronicled by aspirants to his office in an article in today's City Hall newspaper by Edward-Isaac Dovere.

One initiative proposed by the Mayor dealt with the pension system:

"In the weeks ahead, we will make pension reform our number one priority in Albany. And today, I'm glad to announce that a great New Yorker has agreed to take up our cause: Mayor Ed Koch. Last year, he formed a group - New York Uprising - that convinced a majority in both houses, and Governor Cuomo, to pledge their support for redistricting reform, something I strongly support, too. This year, he’ll expand his crusade and if you know Ed, he won't do it quietly. Thanks, Ed.

"Working with Ed and our partners in State government, we will work to pass several basic reforms to bring our pension system into the 21st century.

"First, we can save $8 million a year right off the bat by consolidating pension systems, an administrative reform that will not affect benefits at all.

"Second, we'll seek a new tier for employees hired in the future that would raise the retirement age to 65 for non-uniformed workers. That would produce billions in long-term savings, and bring our retirement age in line with the private sector, even as we offer far more generous benefits. We can also save another $200 million every year by eliminating, for future uniformed retirees, what is effectively a $12,000 annual bonus, paid on top of full pension benefits every year around the holidays. City taxpayers just cannot be expected to give substantial holiday bonuses when so many of them are out of work or having their own wages frozen or cut.

"The third piece of our pension reforms would overturn the State law that prohibits the City from negotiating pension as part of the collective bargaining process. Pension and health care benefits are a substantial part of a City employee's compensation, and so it only makes sense they should be part of the collective bargaining process.

"Right now, State elected officials are setting pension benefits for City workers, and sticking another group - city taxpayers - with the bill. Again, our message to Albany is: we'll pay the bills, but let us get better prices. And the only way we will be able to afford raises for City workers in the future is if we can find some savings in our pension and health care bills. That is not a negotiating stance. It is reality.

"And so today, I will make this commitment: I will not sign a contract with salary increases unless they are accompanied by reforms in benefit packages that produce the savings we need to continue making investments in our future and protecting vital services."

Pension costs are an enormous problem all over the country as, under pressure from public employee unions, governments have given public employees ever more generous pensions, earlier retirement ages, tax-free disability pensions without the necessity of incurring actual disabilities, substantial overtime in the year before retirement which is reflected in swollen pensions, and other abuses negotiated by the finest lawyers, and assisted by pliant actuaries who brazenly conclude that these enhancements come at no cost to the city, without disclosing that they were on union payrolls.

Public employees, like private sector employees, are entitled to decent pensions, and should have the opportunity to contribute to a retirement fund if they wish to receive enhanced benefits. The problem here is that in the classic tug of war between labor and management over wages and pensions, the unions' political strength has driven management into the mud of deficit and despair.

In one way, the City of New York has been attempting, with limited success, to reduce employee pensions for 37 years. The first benefit reduction came on July 1, 1973, when Tier One was superseded by Tier Two, slightly less favorable to employees. A sharper reduction came in 1977, after Fiscal Crisis One in 1974-75. We are now under Tier Five, which covers employees hired after January 1, 2010. Governor Paterson promised the unions that in exchange for their not blocking the creation of the new tier, there would be no layoffs until 2011 at the earliest.

He almost kept that promise, delaying several hundred layoffs to December, which was practically 2011. Meanwhile, the state fiscal situation worsened due to reduced tax collections because of the Great Recession, Medicaid costs increasing by billions of dollars, and other billions going to supplement the pension fund, which is dependent to a considerable extent on the vagaries of the stock market. Although tax receipts and stock prices are now rising, they have a long way to go before the state's pension contribution can be reduced to an affordable level.

As an example of the way our top elected officials operate, Governor Paterson promised publicly that the state would not borrow any money in 2010 to balance its budget. However, the state deferred the payment of three billion dollars which was due to the pension fund. The result was the same as borrowing: the state has to pay interest on the three billion dollars it now owes the pension fund, and that will add to the state's debt service obligations for the foreseeable future.

The argument that what happened is not borrowing is specious. Instead of borrowing the money from banks, which might be increasingly reluctant to risk their capital in a state approaching insolvency, he borrowed the money from the pension fund, which is under the sole control of State Comptroller Thomas DiNapoli, a loyalist who served twenty years in the Assembly where he was a trusted minion of the Speaker. That is why he was chosen for promotion to Comptroller.

Discussion of Albany leads to one outrage piled on another. It is hard to fault the unions for trying to enrich their members, when the people from whom they seek the handouts are themselves so hopelessly compromised. Yet reform must begin somewhere, for the simple reason that the current financial situation in which the State of New York is operating is not sustainable, barring an extraordinary turnaround in the economy, and even in that eventuality, relief would be short-lived.

Let me state that the people in Albany are usually (with some exceptions) not wicked or corrupt. They are part of a system in which they remain in power by pleasing others who support their campaigns and could, if they wished, support their rivals.

The power of union retribution was shown in 2010 in the defeat of Frank Padavan, a state senator from Queens for 38 years, who had served with me in the Lindsay administration. Padavan had headed the Senate Committee on Cities and was an ally of successive New York mayors. His downfall came after he supported a charter school bill, and the UFT, disregarding his prior fidelity to their interests, switched their endorsement to his opponent, former City Councilmember Tony Avella, who had run for mayor in the Democratic primary in 2009 but was defeated by City Comptroller Bill Thompson. Padavan's severed head could have been spiked and placed on one of the pillars that line the Appian Way, as a warning to other elected officials as to the power of the United Federation of Teachers.

We cannot predict what effect the recruitment of Mayor Koch to the cause of pension reform will have on the legislature. We believe he will try to shine the light of day on practices that have received little attention in the past, except from the beneficiaries of the special privilege. To achieve changes, it will be necessary to arouse public interest in the subject. With the Governors Cuomo, Mayors Koch and Bloomberg (and others if they care to join), a strong assault will be mounted against practices which have led New York and many other states - this is by no means a local problem - to the brink of insolvency.

Perhaps the State needs a Lehman Brothers experience to show the people the seriousness of the fiscal situations. Perhaps it can learn from the experience of others. Initially, the decisions will be made by the powerful three men in a room. But while they can borrow money, they can't print it.

Is the bubble bound to burst?

Sleeper Candidate?

Rattner Credits Harry Wilson

With Saving General Motors,

Praises His Financial Acumen




A surprising article came in yesterday on the Internet -- Wayne Barrett of the Village Voice wrote a column on Runnin' Scared, the Voice's political blog. That title was used in the 1960's for a Voice column written by Mary Perot Nichols (1926-96), a scourge of corrupt politicians.

The article was headed: "HARRY WILSON'S WAR; STEVE RATTNER CREDITS MUCH OF GM'S RESCUE TO OBSCURE NY COMPTROLLER CANDIDATE". You can click here to read Barrett's highly informative piece.

It is a fascinating account by Rattner, the former car czar now under fire for paying the tribute required by the disgraced Alan Hevesi to do business with the New York State pension funds. In his new book, "Overhaul", Rattner describes the Federal intervention which not only saved General Motors from bankruptcy and possible liquidation, but rescued thousands of suppliers to GM from the prospect of substantial losses. This would have led to escalating unemployment, primarily in middle America. He gives Harry Wilson credit for the government strategy and for persuading/threatening creditors, bondholders, unions and the company into accepting it.

Wilson, at this point practically a complete unknown, is the Republican candidate for State Comptroller, opposing incumbent Thomas P. DiNapoli, who was installed by Assembly Democrats, led by Speaker Sheldon Silver, when Hevesi was forced to resign from the position to which he had just been re-elected. DiNapoli has now been Comptroller for three and one half years, and is running for what would in fact be a second term.

Meanwhile, the state has plunged further into financial disaster, with the Comptroller issuing periodic warnings against overspending. It is said in politics that the Comptroller must be more fiscally responsible than the Governor (or the Mayor), but how much more responsible he should be is debatable. There is a great difference between pious statements and using the powers of the office to restrain spending. However, considering Rule 8-F: "Do not bite the hand that feeds you", it is understandable that an unelected official not tangle too fiercely with the legislative leaders who gave him the honored position that he holds, an office that will benefit him for the rest of his life as his pension will be computed on his highest three years in salary, and the job pays $151,500, which really isn't much for the sole trustee of funds that have exceeded $120 billion. The salary suggests another Rule, 8-M: "He who pays the piper calls the tune." The theme in both Rules is evoked in Rule 8-FM: "Whose bread I eat, his song I sing." When Hevesi was Comptroller, he received two pensions, one for his legislative service for twenty years, and the other for his professorship at the City University of New York. Hevesi was a triple dipper.

DIGRESSION: Anyone who can figure out why the three Rules cited above are named and numbered as they have been is invited to send us the answers. Winners' names will be published, unless you crave anonymity, in which case your wishes will be respected.

RESUMPTION: No one knows for sure what a person will do once elected, and we have been both pleased and disappointed over the years by the action and inaction of public officials. More often than not, their performance falls short of their promises.

We have deliberately not gone into the details of what Wilson did with GM. They are laid out in Barrett's article, and are relatively complicated for readers who are not that financially sophisticated. The plan, however, seems to have worked out well so far with the company showing multi-billion dollar profits midway through 2010. The success so far of the GM intervention reflects credit on the Obama administration and the people who put the plan together.

The difference between financial brilliance and political success, however, is wide and deep. Before there is any kind of a contest for State Comptroller, people will have to learn who the candidates are. If they know, they can make their choice, applying whatever standards they see fit. If they do not, the election is likely to be a formality. Races for lesser offices tend to attract minimum attention, and in this case there was no primary in either party which would have provided opportunity for exposure by the candidates. That has a disproportionate negative effect on the less well-known candidate, in this case Wilson.

The next eight weeks will show us whether the Republican candidate can ignite widespread feelings against incumbency and the public demand for fiscal responsibility and truth in budgeting into support for himself. The more people who find out about Harry Wilson, the more likely that possibility will become. But the odds are against Wilson because of the predicted Democratic blowout for governor and the two Senate seats, and because the public is even less aware of the Comptroller race than the primary for Attorney General, where five candidates are competing to oppose Daniel Donovan, District Attorney of Staten Island, the Republican nominee. The current AG is Andrew Cuomo, who is, as you know, seeking higher office.

The Republican ticket this year is stronger at the bottom than at the top. Their task is to identify themselves to the voters and present their case. But in a state with 19 million people, spread over different media markets, that is far easier said than done, unless the candidate approaches Bloombergian resources.



StarQuest #703 09.08.2010 893 words

The Age of Andrew

Cuomo Would Pick Ticket,

Seeks Pledges for Reform

By Henry J. Stern
May 21, 2010

Although Andrew Cuomo has not yet announced his candidacy for governor, he has already moved to shape the Democratic ticket and secure commitments from candidates for the Legislature to support his program.

His activity is described in a comprehensive article in today's Times by Nicholas Confessore, appearing on pA20, headed BEHIND SCENES, CUOMO TRIES TO INFLUENCE WHO WILL BE HIS SUCCESSOR. Confessore's lede:

"He has yet to announce his own long-anticipated candidacy for governor, but that has not stopped Attorney General Andrew M. Cuomo from trying to shape the race to succeed him.

"In the weeks leading to the state Democratic convention next week, aides and allies of Mr. Cuomo have moved quietly and methodically to bolster Kathleen M. Rice, Nassau County district attorney and the candidate widely believed to be Mr. Cuomo's preferred successor.

"They have sought to delay or foil endorsements of one of her Democratic rivals, State Senator Eric T. Schneiderman, by two powerful labor unions, and to persuade another, Sean Coffey, to run instead for State Comptroller. When rural Democratic leaders assembled in Niagara Falls this month for a straw poll, Mr. Cuomo's allies also sought to blunt the momentum of Eric R. Dinallo, the former state insurance superintendent, by asking party officials to consider switching their votes to other candidates."

While the candidate for governor traditionally chooses his lieutenant governor (even though the lieutenant governor is chosen separately in the party primary) the Cuomo forces' attempt to select the rest of the ticket raises other issues.

The first is the attempt to secure a balanced ticket, geographically and ethnically. Mr. Cuomo is of Italian ancestry, as are Mr. Dinallo and State Comptroller Thomas P. DiNapoli. Mr. Dinallo and Mr. DiNapoli add nothing in the way of diversity, although Mr. Dinallo's wife is of Puerto Rican descent.

The lesson of diversity was learned in the 1970 state election, when the Democratic ticket consisted of former Supreme Court Justice Arthur J. Goldberg for governor, Basil A. Paterson (David's father) for lieutenant governor, Comptroller Arthur Levitt for re-election and Adam Walinsky, a former aide to Senator Robert F. Kennedy, for attorney general. The Democratic candidate for the United States Senate that year was Congressman Richard Ottinger, who had defeated Ted Sorensen in the Democratic primary. The Democratic ticket that year was derided as "four Jews and" a derogatory term for Mr. Paterson. They all lost, except for Mr. Levitt.

A more threatening possibility is that by dictating the choice of his party for Comptroller and Attorney General, Mr. Cuomo is assuring himself that these officials, once elected, will be indebted to him and act favorably in matters in which he has an interest. The Comptroller, for example, is the state's chief fiscal officer. He certifies the budget and performs many other duties under the State Constitution. He is also the sole trustee of the state employees' pension funds, which now exceed $129 billion. The position provides many opportunities for personal enrichment, which some comptrollers have used for their own advantage.

The current Comptroller, Mr. Napoli, was chosen by the legislature to replace the fallen Alan Hevesi, who had just been re-elected. His principal sponsor was Assembly
Speaker Sheldon Silver, who was determined to choose the new comptroller from among the Democratic legislators, just as Assemblyman Oliver Koppell had been chosen to succeed Attorney General Robert Abrams and Senator Carl McCall had succeeded Comptroller Ned Regan after their resignations.

The Attorney General, who has the ability to prosecute public as well as private corruption, is a powerful public figure. The last two AGs, Eliot Spitzer and Andrew Cuomo, both found the office a path to the governorship. Each gained a solid public reputation, in part because of cases they brought against Wall Street. It is obviously helpful to the governor to have a friendly attorney general, preferably one who he has helped install into office.

Not all attorneys general are elected officials. Although 43 are elected, five (WY, NJ, NH, HI and AK Alaska, not Arkansas, which is AS) are appointed by the governor.
In Maine, the legislature elects the AG by a secret ballot at a joint session of both houses. In Tennessee, the State Supreme Court appoints the AG for an eight-year term. The issue frequently arises as to whether the state attorney general is the governors lawyer, the people's lawyer, or as in some cases, an ambitious advocate out for himself. In the Federal system, as we know, the President appoints the Attorney General, who serves at his pleasure.

The last AG to be summarily dismissed was Elliot Lee Richardson, who was removed at the order of President Nixon in the Saturday Night Massacre of October 20, 1973 for refusing to fire Archibald Cox as the Watergate Special Prosecutor. He was succeeded by his deputy, William Ruckelshaus, who also refused to fire Cox and was promptly dismissed by Nixon. Next in line was the Solicitor General, Robert Bork, who obliged the President by dismissing Cox. I have long believed that Borks action in following Nixon's order to fire Cox was one reason he was not confirmed by the Senate when he was nominated for the Supreme Court in 1987 by President Reagan.

Andrew Cuomo's actions to direct the choice of other elected officials indicates a predilection for a strong governorship. That would be a direct contrast with the situation under Governor Paterson. The current governor, however, did not have the sanction of election by the public, which his successor will presumably enjoy.

The real issue next year will be whether Governor Cuomo or Speaker Silver (if they are both elected) will be the alpha male of New York State government. We read in Wednesday's Times on pA21 in a story by Danny Hakim that five lawyers from Weitz and Luxenberg, the Speaker's law firm, had contributed $236,698 to Kathleen Rice, who is assumed to be Cuomo's choice for attorney general - Irish, a woman, suburban, tough on crime, elected DA.

That works to the detriment of Senator Eric Schneiderman, the candidate of the left wing of the Democratic Party. From a purely practical point of view, however, and without making a judgment on the merits, Cuomo needs Schneiderman like a lochenkopf. Four oth er candidates have attracted little support despite their vigorous efforts.

It is, of course, possible that Cuomo and Silver will co-exist in peace, at least for two years. We will see how the Speaker's home district is redrawn after the decennial census results are published in 2011.. That will depend in part on who draws the lines, and whether personal considerations are involved in the process.

CUOMO WILL SEEK PROGRAM COMMITMENTS FROM CANDIDATES PRIOR TO DECIDING WHETHER HE WILL SUPPORT THEM

The Cuomo initiative is reported at the bottom of p4 of the Daily News in a story by Kenneth Lovett, their Albany bureau chief. The headline: CUOMO'S TELLING HOPEFULS; GET WITH MY PROGRAM & ILL HELP YOU. The lede:

"If you want Andrew Cuomo's backing, you gotta have his back.

"The state attorney general, who plans to announce his run for governor soon, will ask candidates who want his support to sign a pledge to stick to his agenda, the Daily News has learned.

"Cuomo is developing a 'citizens pledge' that will detail reform ideas he wants enacted if he is elected, a source close to him said.

"The Democrat will travel to all 62 counties during the campaign asking for citizens and candidates from all parties to sign the pledge."

To us, this is a good idea. New York Uprising, a group founded in March by former Mayor Ed Koch, Dick Dadey, executive director of Citizens Union, and this blogger for New York Civic, is circulating pledges to candidates for state office, asking for their commitment to a reform agenda on redistricting, conflicts of interests, financial statements and transparency. Mr. Cuomo responded to us specifically promising his support for those goals.

It makes enormous sense for a candidate to seek commitments on these important issues before endorsing anyone. The proof will come in what specifically the candidates are asked to do, and how and by whom they will be held to the pledges they make.

There is one other problem. The News story is attributed to an anonymous source. This means that there is still plausible deniability if the candidate changes his mind. We rely on the integrity of the source and the candidate.

Andrew Cuomo has an opportunity to turn the shambles that is Albany in a new direction. Eliot Spitzer had that opportunity, and completely blew it, even before the scandal..

We wish for the best for New York State, but experience limits our optimism. Perhaps the strong leadership which has been missing for many years will make a difference. But strength has its own weakness, which we hope the new governor will avoid.

CORRECTIONS

Senator Byron Dorgan comes from North Dakota, not Indiana. We knew that.

Queens Assemblywoman Ann-Margaret Carrozza had a residence in Glen Head in Nassau County, not Great Neck. We did not know that. After 14 years in the Assembly, Ms. Carrozza is not a candidate for re-election..

CRAIN'S INSIDER HAS AN ITEM ON REDISTRICTING.

"Former Mayor Ed Koch read the speculation in the Insider that if his nonpartisan-redistricting effort falls short, it will at least dissuade the Legislature from a scandalous redrawing of districts. So Koch enlisted his former parks commissioner, Henry Stern, to assert that anything less than independent redistricting is unacceptable. 'It was necessary to march around Jericho seven times before its walls tumbled,' Stern writes. 'Someday the Legislature's wall of self-perpetuation will collapse into rubble.' Says Koch, the leader of New York Uprising, 'We're so far ahead of where we thought we would be.'"

P.S.:You can find blogger Gary Tilzer's interesting True News by linking here.

StarQuest #671 05.21.2010 1654wds