pensions—an agreement labor attorney Theodore Kheel says was due to labor consultant Jack Bigel, adviser to sanitation union chief John DeLury and many of the city’s municipal unions: “Bigel convinced Lindsay that sanitation workers faced the same physical dangers—hernias and that sort of thing—as cops.” Also in 1967, firemen kept pace with police and won full-pay pensions after thirty-five years. In 1968, transit employees snared twenty-year retirement at the age of fifty; District Council 37 members got to retire at age fifty-five after twenty-five years, as did many Board of Education employees. In 1969, higher education workers also got twenty-five-year pensions. In 1970, corrections and housing officers won twenty-year pensions; most transit employees were no longer required to contribute to their pensions; and the teachers’ union—which helped Governor Rockefeller by remaining “neutral” in that year’s gubernatorial race—captured a twenty-year retirement plan at age fifty-five. Teachers also won a pension sweetener, forcing the city to pay more of their pension costs. A study by former city Budget Director Fred Hayes and then Professor Donna Shalala called this sweetener “the largest unconditional commitment of city funds in the history of American city government.” The city, they said, was forced to assume $1.2 billion of liabilities and up their annual teachers’ pension contribution by $55 million. Sweeteners for other unions followed.
In all, according to the business-dominated Committee for Economic Development, between 1960 and 1970 the state enacted (usually at the city’s urging) fifty-four city pension bills. Between 1961 and 1976, the Temporary Commission on City Finances found, retirement costs rose 469 percent—from $260 million to $1.48 billion. Retirement benefits began to hog the city’s budget. From 1971 to 1976, for instance, the Commission calculated that the city’s budget rose 66 percent while its retirement costs rose 99.7 percent. The growth of these costs, like the growth of debt service,meant there was less to spend on the delivery of services. It meant that pensions, which were supposed to protect people when they grew old, when the kids were grown and they presumably needed less, came to rival their work salary. The city also came to ignore their Social Security pension, which was on top of their city pension.
It also meant the introduction of another gimmick. Since public officials didn’t have to pay for pension settlements right away, they successfully hid expensive labor agreements from the press and public, bequeathing the true costs to future generations. The SEC staff report on city finances cited one such gimmick. By claiming “excess interest” on pension fund earnings, they said, the city reduced its annual pension contribution by $361.6 million between 1972 and 1975. By 1977, the city’s unfunded pension liability—money owed future retirees but not fully provided for—was over $8 billion. “The results of such gimmickry are almost tragic,” observed a New York State Pension Commission study. “They deceive the public employee and the taxpayers into believing that pension costs (and costs of government in general) have been met. In fact, such costs have not been met—they simply have not been paid. Therefore, next year’s taxpayer not only must shoulder his proper share of government costs, but also the costs which have not been paid in prior years and which unfairly have been shifted to him.”
The deception was not just the fault of short-sighted “politicians.” Union leaders, anxious to show results at the bargaining table, also acted like politicians. They, too, run for office. They, too, winked and went along with the game. It was a problem their successors would have to worry about.
Worrying that pensions were out of control, in 1973 the state legislature voted to cap future sweeteners—in time to block a move by the
In all, according to the business-dominated Committee for Economic Development, between 1960 and 1970 the state enacted (usually at the city’s urging) fifty-four city pension bills. Between 1961 and 1976, the Temporary Commission on City Finances found, retirement costs rose 469 percent—from $260 million to $1.48 billion. Retirement benefits began to hog the city’s budget. From 1971 to 1976, for instance, the Commission calculated that the city’s budget rose 66 percent while its retirement costs rose 99.7 percent. The growth of these costs, like the growth of debt service,meant there was less to spend on the delivery of services. It meant that pensions, which were supposed to protect people when they grew old, when the kids were grown and they presumably needed less, came to rival their work salary. The city also came to ignore their Social Security pension, which was on top of their city pension.
It also meant the introduction of another gimmick. Since public officials didn’t have to pay for pension settlements right away, they successfully hid expensive labor agreements from the press and public, bequeathing the true costs to future generations. The SEC staff report on city finances cited one such gimmick. By claiming “excess interest” on pension fund earnings, they said, the city reduced its annual pension contribution by $361.6 million between 1972 and 1975. By 1977, the city’s unfunded pension liability—money owed future retirees but not fully provided for—was over $8 billion. “The results of such gimmickry are almost tragic,” observed a New York State Pension Commission study. “They deceive the public employee and the taxpayers into believing that pension costs (and costs of government in general) have been met. In fact, such costs have not been met—they simply have not been paid. Therefore, next year’s taxpayer not only must shoulder his proper share of government costs, but also the costs which have not been paid in prior years and which unfairly have been shifted to him.”
The deception was not just the fault of short-sighted “politicians.” Union leaders, anxious to show results at the bargaining table, also acted like politicians. They, too, run for office. They, too, winked and went along with the game. It was a problem their successors would have to worry about.
Worrying that pensions were out of control, in 1973 the state legislature voted to cap future sweeteners—in time to block a move by the
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