New York Plan Makes Fund Both Borrower and Lender
By DANNY HAKIM
Published: June 11, 2010
ALBANY — Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund.
And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund — from the same pension fund.
Another oddity of the plan is that the pension fund, which assumes its assets will earn 8 percent a year, would accept interest payments from the state that would probably be 4.5 percent to 5.5 percent.
Those pushing the plan are taking pains to avoid describing it as “borrowing,” saying they are seeking to amortize or “smooth” pension contributions. That is in part because they have distanced themselves from a plan proposed by Lt. Gov. Richard Ravitch that would have the state borrow as much as $6 billion for general operating expenses over the next three years in exchange for budget reforms.
“We’re not borrowing,” said Robert Megna, the state budget director and one of the governor’s top advisers.
Mr. DiNapoli, the comptroller, said: “We would view it more as an extended-payment plan.”
Update: Although the quote at the end of the June 11 NYT article above suggested that NYS Comptroller Thomas DiNapoli supported the pension fund borrowing plan to balance the state budget, he subsequently issued a press release on June 14 insisting he will not allow the pension fund to be raided. The New York Times published more details in a followup June 15 blog post titled Comptroller Backflips on Pension Borrowing.
CONTACT: Press Office
June 14, 2010
DiNapoli: Pension Fund Will Not Be Raided
Statement from State Comptroller Thomas P. DiNapoli
“There have been a number of outrageous and unfounded rumors
and erroneous press reports that I will allow a raid of the pension
fund to balance the state budget.
“Let me be very clear:
The pension fund will not be used to balance the budget.
“The Pew Center recognized New York as one of only four
fully-funded state pension systems. New York’s strong
position has been achieved through long-term, fiscally
responsible practices. My first job as state comptroller
is to protect the one million members, and the rest of
New York State taxpayers, from the irresponsibility
that has left New Jersey, Illinois, California and dozens
of other public pension funds across the nation
dangerously under-funded. I will fight any raids on the
New York State Common Retirement Fund.