New York Mayor Michael Bloomberg said the 8% assumed rate of return for the $103.8 billion New York City Retirement Systems were unrealistically high and may require spending more than has been budgeted for retirement benefits.
“It’s much too high an assumption for us; I think it should be lowered,” Mr. Bloomberg said Monday at a news briefing. “That’s going to require the city to put in more money. It’s very difficult to see where we could get the money to do that.”
The city, which must balance its budget or face a state takeover of operations, has to close a $3.3 billion budget gap projected for fiscal year 2012, which starts July 1. The deficit is forecast to grow to $4.8 billion in 2014, when city officials expect pension costs to increase to $8 billion in 2014 from $7.6 billion now.
Last month, the $124.8 billion New York State Common Retirement Fund, Albany, cut assumed returns to 7.5% from 8%.
Mr. Bloomberg said the real problem is that defined benefits in the city’s plans can’t be reduced under guarantees the Legislature has placed in the state constitution. While it permits new, less-expensive benefit tiers for future employees, savings wouldn’t be realized for 10 or 15 years, Mr. Bloomberg said.
“We’ve been trying to get the governor and the Legislature to vote a fifth tier,” Mr. Bloomberg said. “They won’t do it unless the unions ask them to.”
“The taxpayers don’t want to pay for it and the economies of the world don’t really support those kinds of plans anymore,” the mayor said.
Representatives of city Comptroller John Liu, who acts as the steward of city pension funds, didn’t immediately comment on the mayor’s remarks.
New York City’s five pension funds provide retirement benefits for its police, firefighters, school employees and civil-service workers. On Sept. 28, its largest plan, the New York City Employees’ Retirement System, reported a 14% return in fiscal year 2010, which ended June 30.
Mr. Bloomberg is founder and majority owner of Bloomberg News parent Bloomberg LP.