“Deferring current operating expenses to (a) future period is inconsistent with our view of strong financial management,” Moody’s Investors Service said in a statement. “Continued amortization of annual pension payments could result in a downgrade.”…Public employers deferred $1.1 billion in the fiscal year ended in March 2013, up from $293.2 million in 2011, a near fourfold increase, according to data from the New York state’s Comptroller’s office.The number of public employers using deferrals jumped to nearly 200 in the fiscal year just ended from around 50 two years earlier. About 3,000 employers pay into the system.
One wonders how these cities plan to pay off these obligations in the future, particularly if investment returns come in lower than expected. And as Moody’s has warned before, new laws introduced over the past year that give cities more leeway to defer pension payments may make the problem even worse in the years ahead.In city after city we’ve seen how mismanagement and underfunding of pension funds have led to financial ruin. Yet despite the cautionary tales presented by cities like Detroit and Stockton, cities still persist in kicking the can down the road, hoping that good times will return and strong investments will keep funds afloat. Until such a happy day dawns, they’re plagued by credit downgrades and massive debts, and face an ugly choice: either renege on their pension promises or slash public services to the bone in order to fulfill them. Any New Yorker counting on these pensions should begin to think seriously about a backup plan for retirement.