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Q&A
Analysis of proposal to refinance pension system's unfunded liability
4:20:03
ยท
3 min
Councilmember Brannan asks for the Comptroller's opinion on the mayor's proposal to refinance the unfunded accrual liability for three of the city's pension systems. Comptroller Lander provides a detailed analysis of the proposal and its implications.
- The proposal would save the city money in the short term but add costs in the long run
- Currently, pension funds are about 85% funded on average, with a plan to reach 100% funding by 2032
- The proposal would extend the timeline to reach 100% funding to 2044
- Estimated savings of $8.6 billion from 2025 to 2032, but increased contributions of $13.8 billion from 2033 to 2044
- Comptroller's office does not support the current proposal but would consider a more comprehensive, fiscally responsible long-term plan
Justin Brannan
4:20:03
Okay.
4:20:03
Last thing for me.
4:20:05
The mayor has been lobbying in Albany to allow the city to refinance its unfunded accrual liability for three of the pension systems.
4:20:14
This action would save the city in the short run but it would add additional costs in the long run.
4:20:19
Council sees the merit of this proposal, but we don't think it's appropriate to move forward unilaterally without the support of the employees who fund and rely on the pension systems.
4:20:29
What is your the controller's office opinion of this proposal?
Brad Lander
4:20:34
Yeah.
4:20:34
So we share those concerns, and I'll just make them a little more specific.
4:20:38
So yeah.
4:20:39
So we're currently on path but currently, the pensions are about, on average, about 85% funded across the five funds, which is great.
4:20:49
That's not 85% funded for next year.
4:20:52
That's 85% funded for the totality of our obligations as they stretch out, you know, for decades.
4:20:59
That is, you know, and many folks say, great.
4:21:01
You're in good shape.
4:21:02
But the city nonetheless has a good plan to get to 100% funding that was adopted twenty years ago and put us on a path to reach 100% funding by the year 2032.
4:21:16
This is a plan or a proposal that the the mayor made and that is included in the governor's executive budget to stretch that out another to 2044.
4:21:25
And, of course, if you stretch the payments out longer, you can reduce what you would do between now and 2032.
4:21:31
But as you say, it would cost the city, you know, meaningfully additionally in the out years.
4:21:37
So I think we have those numbers.
4:21:39
You would see a estimated $4,200,000,000 cumulative savings during the period of the financial plan with a total decline in city contributions or, you know, that shows up essentially as savings of 8,600,000,000.0 over the years 2025 to 2032.
4:22:00
But then in order to make it up, you'd see an increase in contributions above what's currently projected of 13,800,000,000.0 in f y twenty thirty three to 2044.
4:22:13
Now that all nets out to zero, but still it means substantially more dollars in the out years than you see savings in the next decade.
4:22:25
And just to do that kind of because does not make any sense.
4:22:30
Now, you know, if there is a serious emergency created as a result of what happens in Washington and we see more specifically what that looks like, you might say, well, maybe we should take another look at that in the context of looking at long term retiree health benefit obligations as it becomes more clear what will happen with the resolution of the lawsuit and retiree health benefits, you might say.
4:22:56
Let's bring that in and calibrate our long term obligations more thoughtfully.
4:23:01
So could there be potentially a responsible way of looking at this as part of a real fiscally responsible long term plan?
4:23:09
It's possible, and we would be glad to consider it.
4:23:12
But the current proposal simply to take some money now and bill it to the future, we do not support.
Justin Brannan
4:23:19
Got it.
4:23:21
Questions from my colleagues?