February 15, 2018
In recent years tensions have grown between politicians and members of the public about the investment strategies which underpin our nation’s public pension systems. At the Main Street Investors Coalition we have often seen how personal political agendas can highjack the savings of the millions of teachers, firefighters, policeman and others who work in the public sector, with lasting detriment to their retirements.
While it may seem that public sector employees are the main victims of any mishandling of public pension funds, it’s important to highlight that impact is felt more widely. Taxpayers are legally required to make up any shortfall in public pension funds, so the rest of Main Street is exposed as well. Every dollar spent paying down the deficit is one that won’t be invested in schools, hospital and much needed infrastructure.
New York City is a prime example of how disagreements between pension managers and their beneficiaries can snowball into a financial headache with consequences for the whole of Main Street.
Recently the American Council for Capital Formation, one of MSIC’s founding members, published a report which explored New York City’s public pensions and found that politically motivated investments have resulted in significant losses. Worse, ACCF concluded that roughly 80 percent of the money the city raised through personal income tax is spent on rectifying the system’s liability.
Scott Stringer, the politician responsible for overseeing the funds, appears to have taken offense. Responding in a New York Daily News op-ed, he argued that study was intended to undermine public trust in his office, and defended his strategy of divesting the city’s holdings in oil and gas companies, while pursuing other environmental and social objectives.
The National Association of Manufacturers President and CEO Jay Timmons pointed out in response that Comptroller Stringer failed to acknowledge that New York’s pensions are only 62 percent funded and that no solution is yet at hand. In fact Timmons, whose organization is also a member of the MSIC, argues that the situation is likely to deteriorate further, as divestment is expected to result in $2.8 billion loss for the system over the next 20 years.
For the sake of the hundreds of thousands of members who rely on the New York City pensions, not to mention the millions of Main Street Investors responsible for bailing out the system, it must be hoped that Mr. Stringer in future focuses his time on maximizing returns and not on defending his reputation. After all, addressing the first issue, will quickly resolve the second.
The Main Street Investors Coalition aims to provide clarity on the investment issues that affect millions of Americans, facilitating dialogue and fostering solutions to improve the financial prospects for Main Street Americans. We hope you will join us in our endeavor to make sure the American Dream remains a real one for all of us.