DiNapoli announced today that he’s approved a recommendation by the State Retirement System Actuary to reduce, from 6.8 percent to 5.9 percent, the assumed rate of return (RoR) on investments by the $268 billion Common Retirement Fund, which underwrites the New York State and Local Employee Retirement System (NYSLERS) and Police and Fire Retirement System (PFRS), of which the comptroller is the sole trustee.
To be sure, even at 5.9 percent, the RoR that the pension fund literally counts on to pay constitutionally guaranteed benefits will remain considerably higher than the yields from commensurate low-risk U.S. Treasury or high-quality corporate bonds, which currently range from 2.3 percent to 3.3 percent. Nonetheless, in isolation, cutting the RoR assumption is an unequivocally good and prudent thing for the comptroller to do.
Assuming lower earnings also tends to result in higher required contributions by employers—which is why politically sensitive public pension fund administrators across the country have tended to set their RoRs at much higher levels than those required for private corporate plans. To guard against volatility in investment returns, which has been especially pronounced over the past 25 years, DiNapoli and other pension fund administrators also resort to “asset smoothing” — i.e., counting average market returns over several years—as a basis for estimating the assets available to pay retirement benefits. In New York’s case, the smoothing period is five years.
The dramatic reversal that shrank the state’s four-year budget gap from $38.7 billion in January to the current $3.4 billion occurred, incredibly, despite the Governor and legislature adopting a budget that increases state spending significantly in education and other areas. What turned the tide was a massive injection of federal aid—including $12.7 billion in no-strings federal aid awarded to the state in March under the American Rescue Plan—along with tax collections that defied earlier projections of vast, pandemic-induced revenue loss, and new tax hikes inflicted on high earners estimated to yield $2.75 billion in new revenue this year alone. As a result, the enacted budget financial plan the Governor’s budget office issued last month shows a balanced budget for this fiscal year and next. Even the red ink that starts accumulating in 2024 and 2025 looks manageable.
But looks are deceiving here. Extending the budget window—as does a chart on page nine of the Comptroller’s report, shown below—reveals large, yawning budget gaps growing from nearly $8 billion in 2026 to nearly $20 billion by the end of the decade. The dual expiration of American Rescue Plan funds in 2026 and a temporary hike in the PIT in 2027 sends the budget deep into the red.
As Governor Cuomo already has pointed out on the state level, the federal stimulus aid amounts to “the ultimate one shot . . . a sugar high.” The highest priority of state and local officials should be to avoid plowing the federal money into recurring spending commitments that will create bigger budget deficits in the future.
In an ideal world, New York pols will embark on a careful, painstaking assessment of needs, weighing short-term relief against recurring long-term benefits. Since most upstate cities are very old, with crumbling physical infrastructures, they would be well advised to invest the bulk of their “Biden bucks” into streets, sidewalks, water and sewer systems. This will save money on maintenance costs—which are high in many of these places. It also will help these cities retain and attract business activity they cannot afford to lose—and were already losing before the pandemic.
Local governments could also consider ways to help small local retail businesses and their landlords, especially restaurants and entertainment venues, which were crushed by the pandemic. One way of doing this might be a property tax holiday, or a long-overdue assessment and equalization update, whose transitional costs could be covered by the federal money.
In its January 28 report, the attorney general’s office argued that low staffing levels in nursing homes was associated with higher death rates from the novel coronavirus. As evidence of that connection, the report presented a table (reproduced in Table 1 below) comparing death rates in nursing homes based on their star ratings for staffing from the U.S. Centers for Medicare & Medicaid Services (CMS). It showed that homes with the lowest staffing grade of one star had an aggregate COVID-19 mortality rate of 7.13 percent, compared to 4.94 percent for homes with a five-star rating.
However, that table was based on the limited data available in mid-November, which encompassed 6,645 deaths, only half the number that are documented now.
When that table is brought up to date, it shows no clear association between lower staffing grades and higher coronavirus mortality (see Table 2). Homes with a three-star staff rating showed the largest percentage of deaths, at 13.62, compared to 12.98 for two-star homes and 12.14 for one-star homes.
Governor Cuomo’s Division of the Budget (DOB) and the Legislature’s fiscal committees have agreed to boost New York State’s revenue projection for fiscal years 2021 and 2022 by $2.45 billion—the latest in a series of upward adjustments that have dramatically improved Albany’s short-term outlook, even as sexual harassment allegations against the governor will complicate negotiations towards a new budget for the fiscal year beginning April 1.
“The salient policy question isn’t whether the March 25th memo introduced COVID into nursing homes, but whether it contributed to higher infection and mortality rates.
“The department’s comments show that it either doesn’t understand statistics, or is willfully ignoring our findings. Our analysis does, in fact, show a consistent relationship between transfers from hospitals to nursing homes and COVID fatalities. These findings were robust to several statistical assumptions.
“Our report included a statewide statistical analysis, which showed that transfers were associated with deaths at the 99 percent confidence level. Those statewide estimates are the ones we used to estimate that transfers were associated with hundreds of additional deaths. In digging a bit deeper, we hypothesized a differential effect upstate and downstate, which was then corroborated by our analysis.
The admission of coronavirus-positive patients into New York nursing homes under March 25 guidance from the New York State Department of Health was associated with a statistically significant increase in resident deaths.
The data show that each new admission of a COVID-positive patient correlated with .09 additional deaths, with a margin of error (MOE) of plus or minus 0.05.
Further, admitting any number of new COVID-positive patients was associated with an average of 4.2 additional deaths per facility (MOE plus or minus 1.9).
The effect was more pronounced upstate—possibly because the pandemic was less severe in that region at the time, so that even a single exposure would have had a larger impact on the level of risk.
The release came six months after the FOIL request was submitted, five months after we and the Government Justice Center filed suit, and one week after a court found that the department had violated FOIL and ordered it to release what were clearly public records.
The pension benefits collected by 969 teachers, college instructors, and school administrators who retired in 2019 with at least 30 years of service credit and received a full year of pension benefits in 2020 averaged $75,212.
NYCTRS paid six-figure pension benefits to 3,708 retired New York City teachers. Of those retirees collecting more than $100,000, 104 retired during the 2019 calendar year.
The death toll in New York’s long-term care facilities jumped by another 1,516 this weekend as the Cuomo administration adjusted its reporting on adult-care facilities to include residents who died after being transferred to hospitals.
The newly disclosed deaths represented an almost eight-fold increase for assisted living and other adult-care facilities, which provide non-medical services for their elderly and disabled residents.