IBO: Union's 'Voodoo' Estimate Closer Than City on Early-Out Bill

IBO: Union's 'Voodoo' Estimate Closer Than City on Early-Out Bill


The city's Independent Budget Office estimates that a bill allowing civilian city employees to retire at age 62 at full pension would cost the city $68.1 million in the first year - far closer to a controversial estimate by a union-paid actuary than to the projection made by the Bloomberg administration.

ROBERT C. NORTH: Estimate on the high side.

The bill, which would have allowed employees to retroactively opt into an early retirement plan initially offered in 1995, was shelved after former City Actuary Jonathan Schwartz - whose fiscal note stating there would be no added cost to the city was accepted by state legislators without independent analysis - told the New York Times that the difficulty of determining how many employees would participate made his estimate "a step above voodoo."

City: Would Top $200M

The Bloomberg administration, in contrast, claimed the bill's first-year cost to the city would be more than $200 million once added health-benefit costs were included.

The IBO report anticipated, however, that the high cost of opting into the plan would deter slightly more than half the 17,000 eligible employees from participating.

This would reduce the pension cost of the bill to $60 million in city funds, according to the IBO, as opposed to the $88-million estimate of City Actuary Robert C. North.

The Mayor's Office of Management and Budget estimated that the long-term additional costs of other fringe benefits - principally the health-benefit costs that would have to be paid to the workers who replaced those who retired early and continued to receive city health coverage - would be $120 million annually.

A $90M Discrepancy

The IBO, looking strictly at the first-year cost and basing it on only 7,980 of the eligible employees opting in because the retroactive pension payments required would be relatively expensive, found those non-pension costs would total $30 million - $90 million less than OMB's projection.

Finally, the IBO report noted, the city's estimate failed to take into consideration the salary savings it would realize by replacing retirement-eligible workers at top pay with those starting at a minimum salary that in most cases is 15-percent below the basic pay rate for their titles. That would save the city $27.8 million, reducing the city's first-year cost to $68.1 million, according to the IBO.

The costs to the city would rise in future years, the IBO noted, because the payroll savings would decrease as employees progressed up the salary scale while health-care costs would continue to rise, more than doubling by 2012.

'A Nonpartisan Look'

Doug Turetsky, the IBO's Communications Director, said, "This is a nonpartisan look at what we thought the costs would be."

A spokesman for the Mayor, Jason Post, responded, "We disagree with the report's methodology and believe that its findings are inaccurate. Despite these problems, the IBO still estimates the actual cost to the city of this bill [by 2012] would be $140 million, while the union actuary used by the State Legislature calculated a cost of zero."

For the moment, the issue is moot, because Assembly Speaker Sheldon Silver put a hold on all pension bills for which Mr. Schwartz did a cost estimate after the Times story appeared. The Legislature adjourned June 23, and is not expected to consider any pension-related legislation until next year.