The only way to reform pensions is to reduce benefits for future workers, which is why these laws affect only workers hired after a certain date. Previous lawmakers tried to slow out-of-control pension costs, but this recent legislation would undo those efforts.
The New York State pension reform would blow a huge hole in the city’s budget. Pensions are set by state law, not collective bargaining. But financing pensions requires bigger contributions from each county in the state.
Meanwhile, New York City Mayor Zohran Mamdani has promised all sorts of expensive benefits, including free child care, free buses and cheaper food. But New York can hardly afford to keep its existing promises, let alone extend more — and more generous pensions, too.
New York City’s debt outlook was just cut to negative, and Chicago’s was downgraded to BBB+. A fiscal crisis seems all but inevitable for both cities. Yet politicians in both cities, as well as in Albany and Springfield, are behaving like a spendthrift on the verge of bankruptcy: Their debt is so great they know they can never pay it back, so they figure they might as well spend while they can.
It is hard to believe lawmakers could be so out of touch with both basic math and the harsh discipline of bond markets. Perhaps they genuinely believe that taxes on wealthier citizens will pay for everything. (If so, they are badly mistaken.) Still, they must know that even if the corporations, billionaires and centimillionaires don’t move, there won’t be enough tax revenue to pay for everything they are promising.
So are they counting on a federal bailout? It has happened before, when the Central States Pension fund, the multi-employer Teamster pension, received a generous bailout under President Joe Biden. It would be awkward, if not impossible, for the government to bail out Teamsters but not police officers, firefighters or teachers. If that is the bet state lawmakers are making, it is a risky gamble, especially if Republicans are in power when they need a bailout.