Already in a tough position brought on by the loss of Wall Street income, and the associated tax revenues, this story on the city pension funds, from the NY Post (City Pension Nightmare) brings more bad news. Apparently the city’s five pension funds have lost close to 30% this year.
This is a scary situation. The losses are so big it could overwhelm the city,” said John Murphy, former executive director of the New York City Employee Retirement System, the largest pension fund.
The most troubling part, however, is the laws governing the funding of the pensions.
By law, the city must make up the difference when the pension funds earn less than 8 percent a year. The city can spread the cost of plugging that gap over the following six years.
Wilth the losses reaching into the billions, it will be interesting to see how the city will be able to provide the additional funding with an already extremely tight budget, even with spreading those funding requirements over six years.
New Jersey, on the other hand, is allowing municipalities to skip required payments to their pension plans next year, according to the New York Times.
Update: Althought this is New York State, it does appear that some politicians are looking for changing pension schemes in order to reduce the present financial liabilities, New York Plans Sweeping Pension Reforms.