New York City Pensions Are Still in Crisis
Editor's note: The following is an article by Mary Williams Walsh and Karl Russell in The New York Times, based on a recent Manhattan Institute report.
In the late 1970s, just one thing stood between America’s biggest city and a catastrophic municipal bankruptcy: the New York City pension system. The crisis erupted in 1975, when New York City had amassed a huge debt and suddenly found no one willing to lend it another cent. Without cash, it could not function. But no one saw bankruptcy as a way out. Instead, New York City got permission from Congress to issue junk bonds and sell them to its municipal pension system.
In 1978, New York promised that its pensions would be under control in 40 years.
Issuing bonds produced $3.5 billion for the city. But by 1978, the city needed more cash and still could not borrow. So officials went to Washington, asking to extend the deal and add a federal guarantee. Federal authorities were shocked. Even without any junk bonds, New York City’s pension fund was way short, with just 50 cents for every dollar it had to pay city retirees. But the city’s budget director, James R. Brigham, reassured them, saying the city would close the pension shortfall in 40 years. Almost 40 years later, the Manhattan Institute has taken a look at how things turned out. In some ways, the pension system is remarkably unchanged. For one thing, the big hole is still there.
Written by Mary Williams Walsh and Karl Russell at The New York Times, based on a Manhattan Institute report, The Never-Ending Hangover: How New York City's Pension Costs Threaten Its Future
This piece originally appeared in The New York Times