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Government Regulation We Can All Get Behind


It’s not often we find good news about pensions or about new types of government regulation. Here’s a story that has both: New York Superintendent of Financial Services Benjamin Lawsky has taken a look at Detroit and decided New York needs rigorous oversight of its public pension funds. The WSJ reports that Lawsky’s office will seek to authorize new regulations “governing the pension funds’ investment decisions and actuarial assumptions”:

Mr. Lawsky’s office has been examining the state’s largest pension fund—New York State Common Retirement Fund, with net assets of $153 billion—for about a year with a focus on a range of issues including anti-fraud measures, technology systems and the “structure” of the investment process, people familiar with the examinations say. A spokesman for State Comptroller Thomas DiNapoli, who oversees the state fund, declined to comment.

Mr. Lawsky’s office is also conducting an examination of the New York State Teachers’ Retirement System. Officials at the teachers fund, which had net assets of about $88 billion, according to its most recent annual report, couldn’t be reached for comment. […]

In his prepared remarks, Mr. Lawsky said he may propose new pension regulations if his examinations “find areas that need urgent and prompt corrective action.”

This is the kind of government regulation we’re very happy to get behind. It is abundantly clear from Detroit, Illinois and elsewhere that public pension systems are poorly regulated. The result has been serious dangers to taxpayers and retirees not only of underfunding but of corruption, pay to play scandals, and politically-motivated investment decisions. Aggressive surveillance and oversight of these systems is urgently required.

One problem area the regulators need to work on is widespread collusion between union leaders and politicians. All too often, politicians make the union leaders look good by agreeing to generous pensions, while union leaders turn around and make politicians look good by not insisting that the shiny new promises actually be funded. This is anything but a victimless crime. Detroit’s retirees are beginning to learn just how high the price for this nonsense can be.

Every union contract involving pensions needs to be independently audited with the increase in required contributions clearly established. And the regulators need to have power: government officials and union leaders should be subject to severe criminal penalties for pension hanky panky, the same way they would be in the private sector.

[Image of piggy bank courtesy of Shutterstock]

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  • Marty Keller

    “One problem area the regulators need to work on is widespread collusion between union leaders and politicians.” Love it when you offer comedy fare, Professor. This being a core element of the blue social model’s power, controlling it by regulation is a contradiction in terms.

    • Nick Bidler

      Something, something, the things that most urgently need saying are the most obvious.

      Also, how do you think dems would take it if ‘public employee pensions’ were subjected to their favorite solution of ‘additional government regulation?’

  • cubanbob

    GAAP accounting and certified financial statements is what’s needed.

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