Gates Supervisor Makes Miner’s Case (Updated)
Mark Assini, supervisor of the Monroe County town of Gates and a financial analyst, has crunched the numbers of Gov. Andrew Cuomo’s pension smoothing proposal and come to the conclusion that, as he put it during a telephone interview this afternoon: “Stephanie is right; she is absolutely right to question this.”
The “Stephanie” in question is, of course, the infamous mayor of Syracuse – Stephanie Miner – who has been publicly clashing (she prefers “disagreeing”) with the governor’s plan to let cash-strapped municipalities like hers borrow against future Tier VI savings to help provide themselves some fiscal stability in the short term.
Assini, who is also president of the Monroe County Supervisors Association, ran the numbers of Cuomo’s plan using figures he gleaned from the governor’s own executive budget and state Budget Director Bob Megna.
The results for the City of Syracuse appear below, and as even a lay person like myself can see, they are not pretty.
“The first five years are golden, very favorable, very enticing,” Assini told me.
“After that, it gets a little ugly…it does smooth your pension rate for 25 years, assuming it all goes well. The problem is the normal contribution rate is going to drop dramatically, according to the governor, and after four or five years, if you can hold on, you’ll be paying less anyway.”
“…Even if the governor says this is a great program, there is a cost. Municipalities should go in with their eyes wide open.”
Assini noted that his figures only include the data of regular state employees, (because that’s the information provided by the governor to date), and not fire, police or teachers, who make up the bulk of most localities’ pension costs.
Conservatively speaking, he said, the cost to governments that opt for pension smoothing – the numbers that appear in the highlighted column in the spreadsheet below – could very well more than double once law enforcement and teachers’ pension costs are factored in.
There’s also an added wrinkle, which is that Cuomo’s plan assumes the pension fund will maintain a rate of return of 7.5% – a very optimistic assumption.
Assini sent me a list of key issues he thinks need to be debated about the governor’s plan, including:
1) The cost can be staggering to “borrow” over 25 years.
2) Those left in the Normal Pension Rate Option may end up subsidizing the big cities and counties that join the “stable rate” proposal.
3) This may underfund the pension…look at the revenue stream for the first (4/5 years). Remember this is like a big annuity!
4) With the bumps in year 5 and 10 this could get very expensive – especially if the pension under-performs causing the terms to stretch out 35 years or more.
5) Tier VI may change in 5 or 10 years. The Legislature has a history of making those changes to gain political favor.
UPDATE: First off, H/T to EJ McMahon, who wrote about Assini and his spreadsheets on Feb. 6. (For the record, Assini is a Republican).
Also, I received the following statement from Budget Division spokesman Morris Peters: “These numbers are not correct and are based on faulty assumptions and a misunderstanding of the proposal.”
|Print article||This entry was posted by Liz Benjamin on February 19, 2013 at 4:33 pm, and is filed under Andrew Cuomo, Pensions, State Budget, Uncategorized. Follow any responses to this post through RSS 2.0. Both comments and pings are currently closed.|