New York City has an underlying fiscal crisis that city officials are failing to address. There is a pension debt of $64.836 billion across the city’s five different pension accounts as of January 2018. This calculation is under a 7% assumed rate of return; this rate is charitable to the fund, as a one-percent decrease in assumed rate would add more than $21 billion dollars of pension debt. If the pension system was to assume the market rate of 3.61%, the pension liabilities soar to a whopping $142.195 billion. The New York City government already contributes more than $10 billion per year to the pension system- more than three times the average operating budget of the 100 largest cities in the United States. So what happened, New York City?
The answer to this question is a simple one: politics. Pension investments have been plagued by poor management and officials seeking political recognition since the 1980’s. Since then New York has weathered tireless social campaigns, including gun retailer and private prison divestment. The result of these noble crusades? Retirees missing billions of dollars in market value and lost investment gains.
More recently, New York City Mayor Bill de Blasio and City Controller Scott Stringer called for divesting $5 billion in fossil fuel stocks from the city’s pension fund. The City Controller has gone as far as releasing a request for information to the public, seeking input for full fossil fuel divestment. Even after the release of multiple academic studies showing the extreme and prolonged losses catalyzed by divestment, Mayor de Blasio still campaigns on the crux of progressive politics. At the rate of current pension spending, the people of New York City will face higher taxes, cuts to services and even possible municipal bankruptcy if these pension issues go unaddressed. New York City must de-politicize pension accounts and start cutting away the financial rot at the core of the Big Apple.