Good News on Pensions

The New York State Common Retirement Fund is the third-largest public employee pension fund in the country. And it is under the control of a single person: the state comptroller.

So when the fund’s investments yield an annual return of slightly more than 13 percent, all credit goes to the comptroller’s office. If you’re a public employee, say a word of thanks to Thomas DiNapoli, the state’s chief fiscal officer. 

The state pension fund is now worth $176 billion—it has never been worth more than it is today. According to Mr. DiNapoli’s office, the state continues to pay about 80 percent of its benefits from investment returns. That’s a sign of prudent management.

It’s also an interesting contrast with the dire situation in New Jersey, where the state has regularly skipped its contribution to the state pension fund and may yet do so again this year despite Governor Chris Christie’s promise to avoid this irresponsible maneuver. The president of New Jersey’s state Senate, Stephen Sweeney, has threatened to shut down the state government if Mr. Christie defers this year’s pension payment.

The situation in New York is positively placid compared with the pension storm in New Jersey. But Albany still needs to build on some of the pension reforms Governor Cuomo and the legislature agreed on early in Mr. Cuomo’s tenure. In 2012, the state passed reforms for new hires that will save some $80 billion over 30 years. Included in the reform package was an increase in the retirement age from 62 to 65, higher contributions from new hires and a new way of calculating annual pension payouts by eliminating the pernicious practice of racking up overtime during a worker’s final three years of service in order to qualify for a higher pension.

While those reforms were welcome, both the state and especially the city still face unsustainable costs for public employee retirement and health benefits. Before the reforms of two years ago, pension costs for state workers had increased by 650 percent from 2002 to 2012, according to the governor’s office.

While the pace of those increases has slowed, they still pose a challenge to the state’s overall fiscal health, especially if those nice double-digit annual returns disappear. Mr. DiNapoli’s stewardship of the fund deserves praise. But let’s not forget the need for continued reform.