Thursday, July 31, 2014
The New York City Pension System, Flush With Cash, Gives Billions To The City Coffers.
When the UFT was negotiating with the City for a contract, the City kept claiming poverty and the UFT accepted their argument by allowing for a cheap "City pattern" to be established by giving a 10% raise for a seven year period or 1.43% annually, much less than the inflation rate. Before the UFT agreed to the contract a very respected economist, Mel Levy, stated in the Civil Service paper,The Chief, that for every 1% point the NYC pension funds exceeded the average7% rate of return, the pension funds kicks back 2 billion dollars to the City's general fund. However, both the UFT and City ignored this extra money as they negotiated a contract.
Now according to the New York City Controllers Office, the NYC pension funds made 17.4% for the last fiscal year. Much of that difference went into the City's general fund and was quite a windfall. The UFT leadership will make the case that they didn't realize the NYC pension fund did so well. However, when the stock market went up 22% for the same period, what did they think the NYC pension fund's rate of return would be since its heavily invested in stocks? Moreover, in the last 5 years, the average rate of return was 13.4% which allowed the City to get a windfall of many of billions of dollars if one uses Mel Levy's projections. Yet the union accepted the City's claim that they were broke, despite the economic uptick in the City's finances. It certainly seems like the City came out ahead of the game when it came to the UFT contract.
Its one thing for the City to claim they're broke but its something else for the union leadership to swallow the bull, hook line, and sinker, and give its members an inferior contract..