"The sky is falling and the taxpayers fleeing" ~ Economic Grim Reaper on impending fiscal collapse.
Could Andrew Cuomo be arithmetically challenged in regard the NY Pension underfunding and other impending disasters with his budget? Yes. Could Andrew be a silver spoon fed son of Mario whose head is swelled with dreams of his coming Presidency? Yes Could Cuomo believe he lives under different rules of ethics because his father Mario anointed him, Governor and President? Yes, because that explains how Cuomo took a $45,000 campaign check from a law firm while Cuomo's deputies were probing one of its attorneys for his role in the pay-to-play pension scandal.
Meanwhile, Comptroller DiNapoli still touts his achievement that "in September 2010, the Fund [teacher's] lowered its assumed investment rate of return to 7.5 percent." No honest retirement fund can safely earn 7.5% in today's market, except if you are Bernie Madoff. A private pension manger would be spending time in jail for such lying fraud. But Dinapoli wasn't done with misleading and fraudulent claims of solvency for pension funds he managed. He was touting the great returns his funds earned in a one year period such as "Domestic public equities returned 17.6 percent, while international public equities returned 14.3 percent. Real estate investments yielded a 26.7 percent return, while private equity investments generated an 18.9 percent return. The Fund’s emerging markets equities returned 16.1 percent, while Treasury Inflation-Protected Securities yielded 9.7 percent and core fixed-income investments returned 8 percent." But DiNapoli forgot to mention that those returns were from huge earlier losses in 2009 recession. "John Cardillo, a spokesman for the teachers' retirement fund, said the fund is still trying to make up for a steep decline two years ago."
Even worse for those teacher funds, the schools now are paying based on DiNapoli's phoney improved safe rate of return which he lowered from 8% to 7.5%. The schools complain that "in 2010, the pension rate was 6.2 percent of payroll and forced schools to collect about $926 million. Now at 11 percent, schools will have to pay nearly $1.7 billion, according to preliminary estimates." Wait till the schools and ultimately the taxpayers discover that an honest safe rate of return for pension funds would be slightly above the 10 year treasury bond rate or very generously 3%. Doing the arithmetic: going from 8% -3% =5% is ten times greater than going from 8%-7.5% = 0.5%. So a 3% safe rate of return would require the schools pay ten times the present increase of (11%-6.2% =) 4.8% to an increase of 48%, which must be added to the prior 6.2% for 54.2% of salary to be contributed to the pension funds. And wait, Cuomo and DiNapoli forgot to tell schools they have to fund retiree health benefits.
How will schools do it with Cuomo's budget cap law? Will more taxpayers flee? Wanna buy some NYS bonds?
