The New York Times
reported last week that New York City’s pension funds were
contributing $40 million to a new “affordable housing” investment
pool and expecting to earn a paltry 2.75 percent return. Gotham’s
comptroller, Scott Stringer (D), who oversees the city’s
pension funds and whose primary experience in business was
running a failed bar-restaurant in Manhattan in the early
1990s, called this a “sound investment.”
Ultimately, taxpayers are on the hook for pension fund
shortfalls—next year the city will contribute $8 billion or 11% of
its budget—so “investments” of this sort are just a covert way of
diverting city cash to particular causes.
Today, the grey lady has a
blockbuster story that looks at how lawmakers, consultants, and
public-employee unions use the city’s pension funds to favor
particular groups and punish their enemies. The teachers’ union,
which helps oversee the city’s pension funds, “keeps a list of
investment firms it sees as unacceptable because of their
connections to groups that, say, favor charter schools.” In 2010,
pension fund trustees extracted an apology and retraction out of
the private equity firm Blackstone, which does business with the
system, after a company official offended them by remarking during
an investment call that public-sector retirement benefits are
“excessive.” Comptroller Stringer is planning to invest $1 billion
in firms led by minorities and women, the Times reports,
even though such initiatives “make it harder to achieve top
investment returns.”
With pension funds devouring an ever-growing share of New York
City’s budget, the story looks at efficiencies that could stave off
the inevitable crisis, such as consolidating five separate funds
and replacing outside managers with city staffers. Here’s a better
idea: Switch all New York City public employees to 403(b)s, so they
can decide how to invest their own nest eggs how they see fit—and
bear the consequences.
Reason on Pensions.
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