The City, Once Again, Wants to Refinance Pensions
Buy now, pay later (just like last year)
It appears our friends in the City Council are not averse to taking risks with pension funding. Unlike Mayor Mamdani, Council Speaker Julie Menin doesn’t want to tax the rich. After all, rich people are fragile, and if you touch them, they may just break. Furthermore, Menin is pretty goshdarn rich herself, and why should she have to pay when she can just put things off and make common folk like us pay in the future?
If you’re on a pension, like I am, you’ll continue to receive it. In fact, if you don’t give a crap about members (or taxpayers) who follow us, you can stop reading right now. Me, I have a kid, I’ve spent decades serving the kids in New York City, and I’d like them to have the best options possible.
I’m proud to have served, and I’m grateful to have the retirement I’ve earned, even as I worked for considerably less than my friends in Long Island schools. I loved my career, and I’d like my students to have that option as well. Some of them now teach at Francis Lewis HS, where I spent most of my career. (Several are math teachers. I don’t know where I went wrong.)
Reamortization, or “smoothing” as Tom Brown likes to call it, means we pay a little less into the pension now, and, well, a whole lot more later. If there’s an economic upturn while we wait, we could do well. If there’s a downturn, there will be pain. Of course, we Americans are addicted to credit.
What could happen? Maybe there will be a new Tier—Tier 7, even if we fix Tier 6. Is this deal a quid pro quo for fixing Tier 6?
Don’t hold your breath for Mulgrew or Garrido to tell us. Still, given their miserable negotiating strategies, it’s hard to imagine they make any gains whatsoever without outlandish givebacks.
There was a pretty big stir when we first brought up last year’s Buy Now, Pay Later scheme. After all, it’s a lot of money to finance pensions. Maybe if we don’t pay it now, it won’t seem so bad later. You might say the same thing when you go and check out that Range Rover you’ve had your eye on. I mean, sure, it’s $150K, but if you pay a little at a time, it may not seem so bad.
There’s a little more happening this time, though, as Marianne Pizzitola pointed out yesterday. They’re talking not only reamortization, but also Pension Obligation Bonds, or POBs. These are taxable bonds that entail more risk than Tom Brown’s beloved “smoothing.” Marianne cites disastrous results elsewhere:
(2013): The largest municipal bankruptcy in U.S. history. Detroit issued $1.4 billion in POBs in 2005–2006. These bonds were a central driver of the city’s insolvency, as the debt service became an unsustainable fixed cost. During bankruptcy, retirees saw direct cuts to their monthly pension checks (roughly 4.5%) and the elimination of cost-of-living adjustments (COLAs).
(2012): Stockton issued $125 million in POBs in 2007. The city’s bankruptcy was explicitly linked to this “bad bet” because the interest on the bonds exceeded the investment returns. While the judge ruled that pensions could be cut, the final settlement prioritized pension payments while wiping out retiree healthcare and paying POB holders only 40–50% of their claims.
(2012): Similar to Stockton, San Bernardino issued millions in POBs before the Great Recession. The resulting “double loss”—owing bond interest while seeing pension assets plummet—pushed the city into a long, contentious bankruptcy process.
(2017): While not a municipality, its specialized bankruptcy (PROMESA) followed the issuance of billions in POBs. Its pension system effectively ran out of cash entirely, forcing a shift to a “pay-as-you-go” model where current taxpayers pay retirees directly because the invested fund no longer exists.
I don’t know about you, but when I open the NY Times front page, I see absolute chaos. On that basis alone, I’m less than confident in economic upturn. Of course, that could change. Full disclosure—I’m a lifelong teacher and musician. I know next to nothing about money. Regardless, I believe it’s on us to protect those who follow us.
My friend Katie and I took a lot of criticism for having brought up the re-amortization. Our trustees, who Mulgrew said may not ever be questioned, were not even going to tell us about it. At some point, one of them said it was on us to follow their meetings or something. I’d argue it’s their job to keep us informed.
Of course, they differ. This doesn’t surprise me. Every single one of our Trustees is a member of the UFT Unity Caucus, and has signed an oath to support Unity no matter what. We know well that they can and will be purged if they displease King Mulgrew. If that isn’t a blatant conflict of interest, I don’t know what is.
The UFT Trustees made up a PowerPoint that suggested we were liars, associating us with anonymous flyers we’d never seen. They showed it at the RTC, the DA, and even brought it to retirees in Florida. At that time, Retired Teacher Chapter (RTC) Chapter Leader Bennett Fischer praised both the trustees and their presentations. I was sorely disappointed to see a guy I’d worked to elect cheering for suggestions I was a liar.
Now you may recall that our RTC passed a resolution opposing reamortization. However, when it was brought to the UFT Delegate Assembly (DA) our friends in Retiree Advocate (RA) , including Bennett, agreed to water it down to say we oppose the resolution “at this time.”
I wrote a column suggesting that the addition of that qualifier rendered our resolution nebulous. It is “this time” now, but in one moment it will be another time. And now, it’s another time already, so UFT is not bound by anything in that agreement. It was foolish to agree to modify our resolution and render it toothless.
The other big resolution RTC managed to pass opposed Medicare Advantage. It managed to make Mulgrew appear as though he supported us, but did not deter him from lobbying against measures like 1096 that would take our health care out of his grasping grubby little paws.
Unity also managed to establish their phony-baloney health committee in that resolution. They get their hand-picked, loyalty-oath signing stooges to approve contracts without seeing them, and thus place a fig leaf over their policy of selling us Whatever, sight unseen.
Meanwhile, Retiree Advocate (RA) members marvel that anything not pre-approved by Unity doesn’t even get voted on at the DA. The problem, of course, is that the DA is a scripted event, choreographed solely to promote Unity interests. For their part, Unity deems us a bunch of doddering old fogies, and celebrates members who propagate odious, ageist stereotypes.
That’s why RA is on the wrong track. Unity is not working in our interests, and we must align with people who do. And that, my friends, would be Marianne Pizzitola and NYC Retirees. Unity condemns her because she does the work we pay them to do.
RA’s failure to seriously organize around NYC Retiree legislation is among its most egregious shortcomings.
Thanks again for calling out the facts and asking for uniform transparency and accountability. The city cannot continue to balance its budget on the backs of the hardworking municipal employees who can already barely afford the cost of living in this town.
Like always, thank you Arthur. It's obscene how City Council and our Unity TRS Board of Trustees hope they can push this pension scheme. Like you show, this agenda falls in line with how municipal retirees have been forced to battle for the health benefits they've earned. To these leaders, lives are commodities to appease others and promises are no longer meant to be kept.