City of Syracuse and Upstate Medical University borrow money to cover pension bills
Mon, 05 Mar 2012 20:09:32 GMT —
Several Central New York agencies are among those using a controversial method to pay for pension costs.
City of Syracuse
Upstate Medical University
are among those borrowing from the state pension system in order to pay pension costs. In fact, they are all within the top 20 borrowers.
When the New York State Pension system sends an e-mail to Syracuse Budget Director Mary Vossler, she dreads opening them. The city's pension bills went up by $5 million last year and have gone up 587% over the past decade.
"We're not getting enough property taxes, we're not getting it in sales taxes, we're not seeing it out of the aid from the state," said Vossler. "So the cities have had to absorb those costs and where do you find the money?"
Recently Syracuse, Oneida County and more than 160 other governmental agencies have been finding money by borrowing it from the state pension system to pay the state pension system what it owes. It's unusual but allowed by the state. Last year Syracuse borrowed $2.3 million to cover police and fire fighter pensions - the maximum allowed by the state comptroller. Upstate Medical University also borrowed more than $18 million to make their pension payment.
In a statement, State Comptroller Thomas DiNapoli said "Amortizing pension costs is an option for some local governments to manage cash flow and to budget for long-term pension costs in good and bad times. It provides local decision makers with another tool to manage their finances."
Not everyone agrees with the controversial plan. Don Dutkowsky, an economics professor at Syracuse University's Maxwell School described it as "questionable accounting." Dutkowsky also said the idea of borrowing from a pension plan to pay for pension debts adds a lot of risks while not addressing any of the long term problems with New York's pension system.
"This strikes me at very best as a very short term fix. This is a problem that is fundamental and structural and it needs to be addressed," said Dutkowsky.
Even though Syracuse's Budget Director has borrowed from the pension plan, she agrees that it is only a short term solution. Mary Vossler said that if cities like Syracuse continue to see double digit percentage increases in their required pension costs, the New York State pension system will no longer be stable.
"Our payment that will be due December 2012 is $30 million. The cities tax levy is $33 million dollars. We're there," said Vossler.
Vossler said Syracuse is not planning on borrowing to pay this year's pension bill but she couldn't completely rule it out.
Spokesperson for Upstate Medical University, Darryl Geddes, says, "Given the volatility of the stock market, which has slowed the pension fund growth, and in the absence of an established funding mechanism for state hospitals to support benefit costs, New York state has approved the ability of municipalities and state organizations, including Upstate, to amortize a portion of the payment it makes to the stateâ??s employee retirement system.â??
â??Upstate continues to make the required annual payments to the stateâ??s pension fund, but this process provides the institution with a more flexible payment structure in light of the current economic situation," says Geddes.