New York Governor, Andrew Cuomo, has introduced a reform agenda for the $140 billion State Common Retirement Fund in a bid to reduce the burden of its liabilities on taxpayers, but there is no sign of fulfilling his election promise of changing the governance structure of the fund.
There has been much written in academic literature about the link between good governance and good performance, and over the years there has been discussion about the NY state fund adopting a trustee board.
Back in 1989 his father, Mario Cuomo, the 52nd Governor of New York, appointed a task force on pension fund investments, which among other things recommended a seven-member board of trustees to oversee the CRF.
The fund is one of a handful in the US – including Michigan, North Carolina and Connecticut – where the state pension plans are under the complete purview of the state treasurer.
Many of these states are looking at pension reform, but for the most part they focus on the impact of the funding status, rather than the more holistic governance agenda.
In Cuomo (junior’s) pension reform legislation a new tier would be introduced for future New York state employees, claiming to save taxpayers $93 billion over the next 30 years.
At the request of Mayor, Michael Bloomberg, the bill also includes a separate pension reform proposal for New York City and the uniformed services.
The main crux of the new pension tier is to increase the retirement age for new employees from 62 to 65, increase employee pension contributions and end so-called pension padding where employees accumulate substantial amounts of overtime in their final years of service to increase their pension.
Since 2001, pension contributions by the state, local governments and schools increased from $368 million to $6.6 billion outside New York City. And within the city, pension costs increased from $1.1 billion to $8.4 billion.
The provisions in the legislation also include requiring employees to contribute 6 per cent of their salary for the duration of their career, with all reform aimed at reducing the burden of the pension on taxpayers. But the reform agenda has no mention of a change in the governance structure of the CRF.
In Cuomo’s campaign literature – “The New NY Agenda: A plan for action” – he argued: “A board of trustees will increase checks and balances and – by increasing the number of people who set policy and review investment decisions – reduce the potentially corrupting influence of politics and political contributions to the comptroller and other elected officials by sharing decision-making with trustees who are not directly subject to political campaign pressures; and provide representatives of the members and beneficiaries of the pension fund – the people who are most directly affected by the fund’s performance – with direct input and oversight of the investment operations.”