On Nov. 29 I wrote a letter to New York State Comptroller H. Carl McCall in response to a press release his office sent out.
The press release announced the New York Legislature had passed a law providing automatic annual cost-of-living increases to the pensions of all retired state employees. There is a catch-up increase for those who retired before Jan. 1, 1997, and an annual increase equal to half of the annual rate of inflation in the future.
The press release added that "all taxpayers owe" this cost-of-living increase to state public employees as "thanks to them for their years of service."
"Why," I asked Mr. McCall in my letter, "do all taxpayers owe New York state public employees a permanent cost-of-living increase in their retirement benefits? Were not the retired public employees paid for their years of service while they were working? ... Are not the current public employees being paid for their service? ... What sacrifice are they making, therefore, that entitles them to additional `thanks for their years of service'? Surely their salaries are enough."
In particular, I asked, what is so special about public employees that taxpayers should afford them a benefit, the inflation-adjusted pension, that is unavailable to most private-sector employees?
In his press release, Mr. McCall said the COLA was affordable because of excellent investment results in the state employees' retirement fund, which he oversees.
I told Mr. McCall in my letter, while the COLA might be affordable now after almost 20 superb years in the equity market, I feared the increase would haunt state taxpayers in the future. How affordable will the COLA be if the real rate of return on equities drops to 3.2%, as some analysts project?
I also told Mr. McCall that I was not asking rhetorical questions. I wanted answers. Almost four months later, I have had no response from Mr. McCall or his office.
Let me try to guess at some of the answers, should the comptroller deign to reply. First, he would probably argue the taxpayers owe the public employees the COLA because the public employees were paid less while they were working than they could have made in the private sector.
I would respond: First, prove it. This might have been true once, but I'm not convinced it is still true, given the clout of public employee unions. Let me see pay scales for similar jobs in the public and private sectors in comparable regions of the state.
Second, if it is so, then the public employees made a conscious decision to work for the state knowing they might be paid less. There was no doubt some offsetting benefit - most probably the greater job security public employees enjoy over private sector employees. That being so, I do not see taxpayers "owe" them anything.
Third, Mr. McCall might respond that all retirees, public and private, ought to have cost-of-living increases built into their pensions. But most private employers would argue that in a competitive world they cannot afford to assume such an unpredictable liability. They don't have the power to tax, and their power to raise prices is often limited by competition.
Even the unpredictable liability of the non-adjusted defined benefit plan has been too much for most private employers in the highly competitive global economy, so they have replaced defined benefit plans with more predictable and less expensive defined contribution plans.
I wonder if others have asked the same questions about his press release.