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Pensions Could Cause 70s-Style Mess in NYC

By Greg Brown   |   Friday, 03 Apr 2009 11:05 AM

New York could face a new, 1970s-style economic calamity due to looming pension fund problems, according to data uncovered by The New York Post.

Much like nearly bankrupt General Motors, the city owes more than it can take in to pay for the pension costs of its cops, prison guards, firefighters, and garbage collectors. Already, the fire department’s pension spending is 109 percent of its payroll, the Post reports.

Pension costs have jumped from $1.9 billion in 2002 to $6.2 billion now.

"Defined benefit plans, such as what the city has, were designed in an earlier generation and are not only obsolete, but unaffordable," Deputy Mayor Ed Skyler declared in a speech before the Citizens Budget Commission, according to the newspaper.

"The private companies that have them, such as GM, are facing bankruptcy and bailouts. The city will be in the same position if we don't get these costs under control."

"Retiring at age 42 is really not a construct that is affordable or realistic," Skyler said.

Major Michael Bloomberg is hoping to up the minimum pension-eligible service by five years to 25 years in order to shave $7 billion in costs over two decades. Politicians at the state level must approve the bill.

New York is not alone. Corporate America and many other public pension funds are in the same boat, according to a recent issue of Financial Intelligence Report, published by Newsmax.

America’s 100 largest companies alone were behind by $217 billion through 2008, with just 79 percent of the money they needed for their pensions. Those 100 had an $86 billion surplus at the end of 2007, reported consulting firm Watson Wyatt.

Investment losses last year caused pension assets to post a 26 percent loss. A separate study showed the plans lost another $54 billion just in February.

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New York could face a new, 1970s-style economic calamity due to looming pension fund problems, according to data uncovered by The New York Post.Much like nearly bankrupt General Motors, the city owes more than it can take in to pay for the pension costs of its cops, prison...
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2009-05-03
 

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