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Embattled city Comptroller John Liu has scrapped his controversial plan for an overhaul of the city’s pension system, The Post has learned.
Larry Schloss, Liu’s chief investment officer and deputy overseeing the pension funds, has alerted insiders the proposal is dead, sources said.
With the backing of Mayor Bloomberg, Liu announced with much fanfare last fall a plan to cut the city’s five pension boards out of investment decisions and consolidate that power in new professional management.
But the proposal drew opposition from union leaders, who said they weren’t consulted by Liu before being asked to turn over much of the oversight on pension investments.
Under Liu’s proposal, five pension boards with 58 directors would have been consolidated under a single professional manager and a single board charged with investing $120 billion in pension funds.
Liu had called his plan a “game changer” that would produce bigger returns from the funds.
He also said that the city spent $470 million on 360 outside consultants and that the merger would slash millions of dollars in unnecessary contracts.
Liu boasted he was “depoliticizing, professionalizing and streamlining” pension operations.
Bloomberg, who has mostly been at odds with the comptroller, chimed in: “We’re overhauling an antiquated pension management that has needed restructuring for generations.”
The proposal drew opposition from labor leaders, including those from the Transport Workers Union and the Teamsters, who have seats on the pension boards.
The plan would require approval in Albany, where unions have a powerful voice with legislators.
In the meantime, Liu has become embroiled in a campaign fund-raising scandal that has damaged him politically even as his allies insist he is running for mayor in 2013.
Sources told The Post that Liu’s decision to pull the plug on the pension-board overhaul was meant as an “olive branch” for union leaders.
Liu, meanwhile, is salvaging part of the plan that does not require Albany or union approval. He has increased the number of in-house investment staffers by 59 percent.
“We have expanded our in-house expertise and worked to reform outdated procurement policies which enable the funds to reduce their reliance on expensive consultants and be more nimble in today’s markets,” said Liu spokesman, Michael Loughran.