New Perspective on 'Voodoo'

Last month, a bill permitting civilian employees to retire at age 55 with 25 years service was shelved by the State Assembly after it was revealed by the New York Times that legislators had relied for a cost estimate solely on a fiscal note prepared by a union actuary.

The article pointed out that while that fiscal note, prepared by former Chief City Actuary Jonathan Schwartz, projected no additional cost would be incurred by the city if the bill were approved, the Bloomberg administration pegged the cost at slightly above $200 million. What seemed particularly damning was a quote from Mr. Schwartz, talking about the difficulty of estimating how many employees would actually take advantage of the bill, that his projection was "a step above voodoo."

A new light was thrown on the controversy last week when the Independent Budget Office published its own analysis of the bill. It found that the Mayor's Office had exaggerated the potential pension and health-benefit costs and failed to consider the savings it would realize as those who retired were replaced by new employees whose salaries were generally at least 15-percent lower, and pegged the first-year cost of the bill at $68.1 million.

Using the IBO's math, the Bloomberg administration's cost estimate for the bill was off by roughly twice as much as Mr. Schwartz's. Going by Mr. Schwartz's injudiciously flip characterization, it might be said that what the administration had done with its calculation was "a half-step above voodoo."

A spokesman for the Mayor heatedly took issue with the IBO's findings and methodology, but credited them enough to point out that its long-term cost estimate was closer to the city's than to Mr. Schwartz's. What should be clear from the IBO report - if it wasn't already - was that it's possible to have large discrepancies in cost estimates when there is no way to easily quantify how many people will take advantage of a bill like this one.

Mr. Schwartz's lowball estimate was based in large part on the belief that not many of the roughly 17,000 employees who would be eligible for the early-retirement plan would take advantage of it. A relatively low number chose to participate when it was first offered more than a dozen years ago because it required significantly greater pension contributions, and someone wishing to opt in now who is currently making $50,000 a year would have to make a retroactive contribution of $22,000.

The city assumed a large percentage of those eligible would take part. The IBO wound up in the middle, figuring about 47 percent would participate.

The real issue, as we noted last month, is that the Legislature should not rely on a union consultant for pension estimates, but rather seek an independent analysis.

It is worth noting, also, that the Times, after running its initial "gotcha" story on page 1 and a follow-up story on the front-page of its metro section, gave no coverage at all to the IBO's report. That's undoubtedly fine by the Bloomberg administration, but fair and balanced it ain't.