Mayor nixes union plan to use reserve cash on wages instead of pension
Last Updated: 1:16 PM, February 4, 2012
Posted: 12:35 AM, February 4, 2012
In a bizarre political power play, city union leaders say they want to raid funds that Mayor Bloomberg set aside to cover massive pension costs to give workers raises instead, The Post has learned.
No dice, the mayor retorted.
Bloomberg said he’s being fiscally prudent by putting up to $1 billion in reserve to cover additional pension costs. He said the additional money dedicated to pensions was required by actions recommended by the city’s pension analyst.
Labor leaders were furious.
“We have unions that have been going two years without a contract,” said Harry Nenespoli, president of the Uniform Sanitationmen’s Association and head of the Municipal Labor Coalition.
City Actuary Robert North Jr. proposed reducing the assumed rate of return of the city’s five pension funds’ investments from 8 to 7 percent.
The lower the rate of return, the more the city has to chip in.
Anticipating North’s move, Bloomberg has socked away $1 billion in the budget to cover the added costs.
But the change requires approval from the state Legislature, where the unions wield influence.
Labor leaders are suggesting they will block the change in Albany. They want a higher rate of return so the city can devote more city funds to raises instead of pensions.
“I don’t know if the 7 percent number can be done without us,” Nenespoli said. “We have attorneys looking at it now. We feel it’s not necessary to go to 7 percent. In 43 cities [where the rate of return was reduced] it did not go down a full point.”
Sources said union leaders have discussed a 7.25 or 7.5 percent return rate, freeing up $500 million that they say could be used for raises.
North said the city pension payments to accommodate the change could be stretched out over 22 years, reducing this year’s initial payments to $575 million instead of $1 billion.
But Bloomberg opposes stretching the payments.
“What that really does is just move the costs to our children,” said the mayor. “Our children are going to have to pay everything we don’t pay now. So the city was trying to act responsibly — even more responsibly, I think, than the actuary.”
Under North’s stretch-out plan, the city would have to spend $850 million less over two years than it was planning to spend on pensions.
Labor leaders want the savings to plowed into pay hikes.
“The unions want to gobble that up,” said one city official.
Bloomberg said the current 8 percent rate of return on pension investments is overly optimistic, even irresponsible.
“It’s so ridiculous it doesn’t pass the laugh test,” the mayor said.
Lowering the rate to 7 percent, he said, “is still laughable, but at least it takes it in the right direction.”
$hy and retiring
Mayor Bloomberg has agreed to boost city funding for employee pensions to keep pace with lower returns on the funds’ investments. Union officials want to take that money and use it for raises.
* City’s pension cost for fiscal year 2012 is estimated at $7.8 billion.
* Mayor Bloomberg’s fiscal year 2013 budget includes a $575 million increase to fund pensions.
* City unions want to divert $500 million from increased pension funding to salary hikes.