If you’re looking to blast NY Mayor De Blasio for his union ties, you don’t have far to look. The city’s new progressive honcho looks poised to protect sinecure board positions for union leaders that may cost pensioners and taxpayers billions of dollars annually.The Economist writes that New York’s screwy management system for public pension funds is to blame for its funds’ mediocre returns: not only are public pensions run inefficiently by five separate pension plans (each with its own policies, trustees and consultants), but none of the five funds manages assets itself, instead outsourcing the job to other well-paid managers and consultants.Combining the funds into one pool and bringing management in-house could increase returns by one or two percent annually, saving the city billions of dollars every year. But cutting the fat would mean smaller pension boards, something union reps won’t stand for:
Combining the five plans into one would bring all kinds of benefits, from increased efficiency to better risk management. In 2011 Michael Bloomberg, then the city’s mayor, tried to do just that, but the scheme was stymied by union representatives, most of whom would be forced to give up their seats on the smaller boards.Bill De Blasio, who took over from Mr Bloomberg last week, won election not least because of the support of the city’s municipal-employee unions. They have vowed to continue to resist any attempt to consolidate the five pension plans.
To the list of those who are licking their chops at the prospect of four more years of “progressive” administration at Gracie Mansion, we can now add Wall Street consultants, asset managers and union leaders. Pensioners and taxpayers, on the other hand, have much less to look forward to.