A Deeper Dig Into Debt-Thank You Abbate

Posted on June 29th, 2010

NY TIMES

CITY ROOM

June 28, 2010, 5:49 pm

A Bigger Pension Borrowing Plan

By DANNY HAKIM

ALBANY — The state’s plan to borrow from the pension fund is potentially growing by billions of dollars.

About two weeks ago, Gov. David A. Paterson and lawmakers reached a tentative agreement to allow the state and municipalities to borrow $6 billion from the state pension fund over the next three years. Now the Legislature, acting on its own, has scrapped that in favor of a more aggressive plan that would allow for borrowing from the pension fund in perpetuity. Each plan would help balance the budget this year.

The new plan, which would allow borrowing in the tens of billions of dollars over time, closely matches one proposed by Comptroller Thomas P. DiNapoli. Mr. DiNapoli, however, has cooled to the whole idea in recent weeks after it was criticized by budget watchdogs, and Harry Wilson, a Republican challenging his re-election.

The comptroller’s office said in a statement: “The ability for local governments particularly to deal with volatility and spikes in pension fund contribution has become increasingly difficult.

“Comptroller DiNapoli’s plan would give local governments an option, just like with a homeowner’s home utility bill, to do balanced billing.”

The pension plan is included in the Legislature’s revenue bill — the portion of the budget in which new taxes, fees and other revenue-raising initiatives are laid out — and is expected to be taken up and passed by both houses on Tuesday. However, the bill would need Mr. Paterson’s signature.

The idea behind the plan is that it would allow the state and local governments outside of New York City to essentially borrow money from the pension fund to pay a portion of their required annual contributions to the pension fund.

This budgetary sleight of hand has been decried by fiscal conservatives.

“What you’re really saying is you don’t want people to see what these benefits really cost, because if you did, there would be pressure to reduce and reform them,” said Edmund J. McMahon, director of the Empire Center for New York State Policy, a conservative-leaning research group.

“It’s basically the equivalent of rolling over debt in perpetuity, if the markets don’t cooperate with a return to double-digit annual returns,” he added.

The plan would also force those governments that opt in to contribute more money to the system during bull markets; the money would then be set aside in a reserve fund to help during bear markets.

Assemblyman Peter J. Abbate Jr., the chairman of the Assembly’s Labor Committee, defended the measure.

“The pension system is going to be fine if the market does fine,” Mr. Abbate said, adding, “The reason to do this is to help counties and the state out — not to enhance pensions, not to borrow to balance the budget. The main purpose of the legislation is to smooth out the amount people have to pay.”

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Comments:

1.  Great idea!

Tomorrow I am going to do the same.

I am going to borrow money from my home equity line of credit to PAY my home equity line of credit.

That sounds like it will really work out great for me.

— Roland Wu

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2. ………….The legislature and its supporters don’t want us to see what these pension benefits really cost, because if we knew — now I shift to my own wording — we would not only demand reform for the future, we would reduce previously granted benefits to the extent legally possible, and, most especially, we would get rid of this current legislature and its leadership.

Throw them out, every single one of them. They have done no good at all; they have done nothing but harm to the State of New York and its citizens.

Nat

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3.  Every state where Democratic Socialists are in power is in dire financial straights. Does that not tell voters something? If not there will be no hope for those states as this near depression Obama has created grows deeper and deeper. These folks dont have a clue how to manage anything having never managed anything execpt dipping into the taxpayers wallets to steal more money. Vote Republican if you want you kids to have a decent life. With all their faults they are light years ahead of the Democratic Socialist when it comes to managing the folks business.

— Bob Davis

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