New Study: NYC’s True Pension Liabilities Far Exceed Official Reports

The city’s real unfunded pension liability is $142 billion—more than twice the official number.

NEW YORK, NY — Even using accepted government accounting standards, New York City’s pension funds are significantly underfunded; but a new Manhattan Institute report finds that the reality is far bleaker. Using “market rate” discounting—recommended by most independent actuaries and economists—E.J. McMahon and Josh B. McGee show that New York’s real unfunded pension liability is $142 billion, not $65 billion, as officially reported. The city cannot afford to stand by and hope for the best: without significant action, these retiree costs pose a significant risk to New York’s fiscal future.

This growing debt has immediate real-world consequences, too: New Yorkers have forgone billions of dollars a year in services, infrastructure improvements, and potential tax savings to back up the state’s constitutional guarantee of generous pensions for city employees. Since 2014, for the first time on record, the city’s pension contributions exceeded capital expenditures. In other words, the city has been spending more to meet its pension obligations than to build and renovate bridges, parks, schools, and other public assets.

To deal with New York’s pension obligations in a more honest, responsible manner, McMahon and McGee recommend two short-term steps:

1. Reduce overoptimistic investment-return assumptions, as recommended by independent actuarial consultants in 2015.
2. Tap into the large pots of money that the mayor has reserved for pay raises in the next round of contract settlements to fund the $655 million a year in required additional pension contributions.

Click here to read the full report.