Press-Republican

October 12, 2012

State comptroller expects one more year of pension-fund hikes

By JOE LoTEMPLIO
Press-Republican

---- — PLATTSBURGH — Payments to the state pension fund have been a drain on local governments for the past decade — and will be at least for another year. 

But the picture should improve a bit after that, says State Comptroller Thomas P. DiNapoli.

“We understand that for municipalities it has been a real challenge,” he told the Press-Republican Editorial Board in a recent meeting.

The $150 billion pension fund is tied to the stock market, and the meltdown of 2008 and 2009, when the fund lost about 26 percent, is still having an impact, DiNapoli explained.

Because there is about a two-year lag on when the impact of investments, whether they be highs or lows, become a reality, the state operates on a five-year average. There will be an increase this year and next year as the five-year cycle winds down.

But after that, DiNapoli said, the situation should improve.

“We expect the trends to come down, but we are still feeling the effects of 2008,” he said.

‘THE OTHER EXTREME’

The City of Plattsburgh has been hit hard by pension-fund-payment increases in recent years. For 2013, the cost will be about $3.4 million. In 2009, the payment was about $1.3 million, and in 2000, it was only $17,700.

DiNapoli said the low payments of 12 years ago were not reality.

“It was a mistake to think that was real and that was the way it was going to stay,” he said.

“Now we are at the other end of the extreme, and the concern is not to overreact.”

To help municipalities deal with the high payments, DiNapoli’s office has offered an option to amortize payments. But some, among them Plattsburgh Mayor Donald Kasprzak, believe that is a “credit-card mentality” that will not help in the long run.

“That’s what got the state in trouble in the first place,” he said.

DiNapoli said Kasprzak and other mayors do not have to amortize if they don’t want to.

“It is an option to help them if they want,” he said.

HEALTHY RETURNS

Kasprzak thinks better options should be available.

“It’s unfortunate that the decisions being made by the Comptroller’s Office have affected each and every municipality in the state with double-digit increases in the Retirement Fund in recent years,” he said.

“It is imperative that decisions in the future improve for the best interests of every city in the state.”

The fund has been doing much better the past few years, the comptroller said, as most of the money has been coming from investments and not taxpayer funds. One area of investment, about 25 percent, is in private equity.

Those investments have yielded healthy returns of about 30 percent, which not only helps the fund, DiNapoli said, but helps communities by building tax bases.

“That helps relieve the pressure on local communities and helps them with their payments,” he said.

‘NOT IDEAL’

In order to meet the high payments and other budget demands, such as the 2 percent tax-levy cap imposed by the state, many local governments are dipping deeply into fund balances. DiNapoli said he understands the necessity to do that but urges caution.

“That could become a problem two or three years down the road,” he said.

DiNapoli agrees that the state has not offered mandate relief in conjunction with the tax cap, something screamed for by many municipal leaders.

“In an ideal world, the state would come up with the money for a lot of these mandates, but we don’t live in an ideal world.”

Email Joe LoTemplio:

jlotemplio@pressrepublican.com