A Local Government Practitioner's View of the Sustainability of Defined‐Benefit Pension Plans

• DOI: http://doi.org/10.1111/j.1540-6210.2012.02663.x
• Published date: 01 November 2012
• Date: 01 November 2012
• Author: Ian M. Coyle

Perspective

Ian M. Coyle is county administrator

of the county of Livingston, New York.

He is a member of the International City/

County Management Association and the

American Society for Public Administration,

a member of the board of editors of State

and Local Government Review, and

president of the New York State City/County

Management Association. He is currently an

adjunct professor of public administration at

multiple colleges and universities.

E-mail: icoyle@co.livingston.ny.us

786 Public Administration Review • November | December 2012

Public Administration Review,

Vol. 72, Iss. 6, pp. 786–787. © 2012 by

The American Society for Public Administration.

DOI: 10.111/j.1540-6210.2012.02663.x.

Ian M. Coyle

Livingston County, New York

As a county administrator dealing every day

with the afteref‌f ects of spikes in pension

obligation expenses, I welcome the debate

called for in New York State Comptroller  omas P.

DiNapoli’s PAR Perspective, “Retirement Security for

Americans and the Role of Def‌i ned-Benef‌i t Pension

Plans” (July/August 2012).

Although Comptroller DiNapoli makes a call for

the protection of def‌i ned-benef‌i t pension plans and

sounds the warning bell against 401(k)-style plans—

and def‌i nes this as the singular pension issue of news

accounts on the sustainability of public pensions—I

believe that the f‌i nancial obligations themselves,

imposed on local government as a state-directed

mandate in New York and countless other states, is

the crucial issue for public of‌f‌i cials and should be the

central question that shapes the debate on public pen-

sion systems.

While this essay is not intended to be a point-by-

point rebuttal of Comptroller DiNapoli’s work, it is

warranted to look at one of his statements, in which

facts were omitted or overlooked, because I believe

that it frames the issue well. He writes that “pen-

sion contributions from state and local governments

nationwide amount to 3.8 percent of their spending,

on average. In New York, the number is 2.4 percent of

state operating funds.”

For the casual reader outside the state of New York,

those numbers seem relatively bland. However, a

deeper analysis is required to see the true picture.

From an intergovernmental perspective, the 62 county

governments in New York State are the next level

down the hierarchal structure in the state. A recent

survey of county of‌f‌i cials conducted in August 2012

showed that, on average, expected 2013 pension

obligations as a percentage of operating funds spend-

ing will be nearly 4.7 percent.  is is more than 20

percent higher than the national average. As a percent-

age of total tax levies, the number is 22 percent.  is

is the true picture.

One must also look at the New York State percentage.

While 2.4 percent appears small, one must consider

the number with information specif‌i c to New York

State.  e state budget

in New

York ($133 billion in

2012–13) is so immense that the percentage of spend-

ing is bound to appear artif‌i cially low. As some readers

of PAR might know, New York State is well known for

having the most expensive Medicaid program ($54

billion in 2012–13) in the United States—as a single

program, this expense is larger than the entire budgets

of more than 30 states.  is no doubt helps def‌l ate the

pension obligation as a percentage expense.

While the impact of the recent economic down-

town—from 2008 onward—is often cited as the main

cause of pension ills, it is but one of many. In 2000,

total county government pension obligations in New

York were $47 million. In 2014, those obligations are

forecasted to be $1.17 billion.  at is a 2,400 percent

increase. In New York, as in other states, the comp-

troller’s of‌f‌i ce administers the investment strategy of

the pension fund. Investment acumen is a key factor

in returns and thus, if sound, a key factor in relief

for municipal payers. For the state f‌i scal year that

just ended, Comptroller DiNapoli cited the overall

investment return for the Common Retirement Fund

(CRF) as 5.96 percent. While we would all take that

on some of our personal savings account investments,

the CRF’s investment assumption was 7.5 percent.

 ose returns, while positive, ref‌l ect a loss of nearly

$2 billion versus expected income.  is will undoubt-

edly translate into continued higher contribution rates

for local governments. Finally, the New York State

Pension system is more than 100 percent funded.  is

means that it has enough funds to pay out all pension

obligations should all individuals qualifying for a pen-

sion payment retire tomorrow. One needs to question

the logic and reasonableness of this methodology.

I contend that the core issue is not the f‌i scal health of

public pension systems, but the sustainability of those

local governments that fund obligations with taxpayer

dollars.

A Local Government Practitioner’s View of the Sustainability

of Def‌i ned-Benef‌i t Pension Plans