Hike NY Lawmakers' Pay -- And Kill Their Pensions

New York state lawmakers' ongoing quest for a pay hike for themselves represents a staggering display of chutzpah — but also an opportunity.

There have been many suggestions for what the public should get in return for a raise, ranging from the well-intentioned (such as reforming abuse of per-diems) to the positively harmful (a “robust minimum-wage package”).

But the Legislature itself has shown the way with its pledge to amend the state constitution and deny pensions to those convicted of public corruption.

If the lawmakers are going to all that trouble, why stop with felons? The commission recently appointed to study legislators' pay should recommend a raise in exchange for ending their pensions — or at least the promise of defined-benefit pensions — for all elected state government officials.

One reason state and local governments nationwide remain saddled with trillions in retirement-benefit debt is that lawmakers themselves are beneficiaries of the system. For someone who has spent a career in the government, even a modest pension is equivalent to a 401(k) plan worth hundreds of thousands of dollars.

Which is why legislators, who are public employees, have been so unenthusiastic about restructuring retirement benefits.

New York's pension-debt burden at present is less onerous than in other states, such as New Jersey and Illinois. But the problem with public pension systems is that even the best-funded among them can't escape soaring costs. And those costs drive up taxes and crowd out spending on other things, like schools and cops.

For example, around 70 percent of the New York State Common Retirement Fund's $180 billion is invested in equities. That asset allocation ensures the next time the stock market plummets, the state's annual pension bill will spike, just as it did in the wake of past crashes.

Public pension fund investments have to be high-yield and high-risk, in order to support rich benefits.

New York passed a pension reform in 2012, but the modifications it made to workers' benefits were unambitious and applied only to new hires.

And, as the Citizen Budget Commission has documented, the spirit of the reform is under constant threat each legislative session with the introduction of “pension sweetener” bills by state senators and assemblymen who apparently learned nothing from the dark budget years of 2009-2011.

In a sane world, “part-time” legislators wouldn't qualify for pensions, and no deal would be necessary. But New York's annual pension bill is over $2 billion; the expense for lawmakers' pay is $20 million.

A bump in pay would be a small price to pay for a pension policy less fraught with outrageous conflicts of interest. The incentive to serve in the Legislature as long as possible would also be weaker than under the current system, in which the pension benefit's value is based on years of service.

Data from the National Conference of State Legislatures show that Albany lawmakers are already among the best-paid in the nation. But that's not necessarily the best benchmark.

In America, the tendency has long been to overpay the rank and file while compensating top brass at well below market rate. The great French political philosopher Alexis de Tocqueville, writing in the 1830s, remarked on the irrationality of a public pay scale in which “the salaries seem . . . to decrease as the authority of those who receive them is augmented.”

It's remarkable how little has changed almost 200 years later: Governors and big-city mayors make as much as mid-level corporate executives and legislators still less. But either lawmakers are part-timers, who shouldn't get pensions, or they aren't.

The last time the Legislature cut a deal to raise lawmakers' pay, it triggered a revolution in public education. In 1998, they got a 38 percent raise, and then-Gov. George Pataki and the public got charter schools. That was money well spent.

This would be at best a mini-revolution, but that's the case for the vast majority of policymaking. When it comes to cleaning up Albany, we have to take what we can get.

Stephen Eide is a senior fellow at the Manhattan Institute and author of the recent report “California Crowd-Out: How Rising Retirement Benefit Costs Threaten Municipal Services.”

This piece originally appeared in New York Post

This piece originally appeared in New York Post