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Liu’s analysis of the pension funds’ sustainability is laughable.  It uses a base scenario of an 8% total rate of return.  But lest we find that too bullish, it also includes another scenario where the rate of return is 7.5%, and finally a doomsday scenario where the return is . . . God forbid . . . 7%!  Now that’s a stress test.As far as the last decade’s returns being  ”unexpectedly poor,” I’ve got to ask, unexpected by whom?  The view that stocks were absurdly overvalued in 2000 was not held by some tiny minority of marginal characters.  Bears weren’t just cranks on the buy side.  There were strategists from marquee Wall Street banks who were permitted to state their views publicly.  Any economist who wasn’t a joke or working for Treasury or the Fed was saying that we were headed to Nasdaq 2000.  Yet to Liu, this was “unexpected.”  And according to Liu, we’re at the cusp of a 50-year bull market.  Why?  Because nobody wants to hear that NYC’s municipal pension contributions cannot be sustained, which is the only conclusion that could be drawn if you ran the numbers under a real stress scenario.  I’ve never met Liu but I presume he’s not a total idiot.  He knows that middle-class taxpayers aren’t voting for the candidate who says he’s going to have to jack up their taxes so the city’s corrections officers can continue to retire at the ripe old age of 42.   He definitely knows that the employee unions don’t want to hear it, because they know that the pressure to abandon defined benefit plans for future employees would be irresistible if the true state of the system were publicized. Liu’s the rank-and-file’s darling these days.  I suspect he’ll be less loved when he’s laying off teachers aides and failing to reduce class sizes.  Although there’s always the wildcard of another pension sweetener, a la Bloomberg.  If so, hopefully Liu will get something back that’s better than “pay for performance.” 

I discussed that using Census Bureau data.  It used to be really low. 

In FY 2009 spending on pensions and other benefits totaled $3,319 per student for New York City when adjusted downward for the cost of living, more than double the $1,292 in the U.S., and also more than the $2,522 (adjusted) in the Downstate Suburbs, $2,730 in Upstate New York, $1,162 (adjusted) in Massachusetts, and $1,199 in New Jersey.

As FY 2009, NYC’s instructional wages salaries per student are also relatively high, at an adjusted $6,523 per student compared with the U.S. average of just $4,331. That’s more than 50.6% above average, even after an adjustment for the higher cost of living here. In this category the Downstate Suburbs and Upstate New York were higher still at $7,191 (adjusted) and $6,687 per student, while New Jersey and Massachusetts were lower.Bottom line, the Downstate suburban wages per student are sky high compared with just about anywhere else, even with a cost of living adjustment, but NYC is (was?) catching up after having been way behind. A disproportionate (and growing) share of the instructional expenditures here goes to benefits with much of that to the retired.  The UFT’s choice — twice, once in the 1960s, and then more recently.

Love how this website is blocking comments of the people who don’t agree with the anti-teacher comments.