It is a basic principal of finance that if you have to borrow to cover your day-to-day expenses, then you have fiscal problems. Yet, that is exactly what a growing number of local governments throughout the state are doing. And frankly, they can’t be blamed as it is the only option that the great “Albany” has provided them relative to relief.
In 2010, the Legislature approved a measure proposed by Comptroller Tom DiNapoli to allow state and local governments to borrow from the state’s roughly $150 billion pension fund to cover a portion of their annual pension costs. They are then charged 3% interest as they pay back the fund over a ten year period.
We’ve written about increasing pension costs before.
The funny thing is, as the sole trustee of the pension fund, Comptroller DiNapoli has never advanced ideas that would fix old laws that drive up pension costs. You’d think he would, since it is in the pension funds best interest to help state and local governments afford their bills.
Yet he doesn’t. Why? Well, it’s just easier to kick the can down to road than confront reality and that is: that the pension system is broken and overly costly.
You wouldn’t pay your mortgage with a credit card, so why would we allow government units that meet their pension obligation to borrow from a fund that it can’t afford to pay? That is backward thinking at its best.
We need real changes to control the rising costs of pensions. If letting them simply borrow to meet their obligation is the best we can do then we’re in trouble. Because if we don’t see change, then we’ve only added to the bills that will have to be paid by our children.