New York’s public-employee-pension costs are gobbling up ever more of state and municipal budgets. But while taxpayers are still digging the pension funds out of their massive 2008-09 investment losses, the elected state and city comptrollers who oversee these funds, Thomas DiNapoli and John Liu, have used the public’s pension investments to advance positions favored by labor unions and other political special interests.
DiNapoli is the sole trustee of the $160 billion New York State Common Retirement Fund. The fund covers retirement obligations for non-teacher public employees of the state and most municipalities, excepting New York City.
In the last three years, municipalities’ contributions to cover pension costs have exploded, rising from 15 percent to 29 percent of salaries for police and fire employees, and from 7.4 percent to 21 percent of salaries for other workers.
To give a hand to local governments responsible for footing this bill, Gov. Cuomo proposed a controversial pension “smoothing” option for local governments. DiNapoli countered by expanding his existing plan to let municipalities defer a portion of their pension contributions — essentially kicking the can down the road.
As our public pension costs spiraled out of control, what else has DiNapoli been up to? Browbeating companies for political ends by introducing shareholder proposals on the proxy ballots of corporations in which the fund invests.
The state pension fund has introduced 27 proposals at Fortune 250 companies over the last four years, including 12 so far in 2013 — more than any other institutional investor. None of these proposals has received the backing of a majority of shareholders.
And all but one of the 27 proposals have involved social or political issues unrelated to the bottom line: 17 about companies’ political spending or lobbying, five related to environmental concerns and four (introduced each of the last four years) calling on ExxonMobil to add sexual orientation and gender identity to its equal-employment-opportunity policy.
Whatever the merits of these ideas, they aren’t going to help the pension fund hit its investing targets.
Even the New York fund’s one shareholder proposal related to executive compensation — a 2013 proposal submitted to Abbott Laboratories shareholders — may be more about politics than investing. In both 2012 and 2013, union-affiliated funds sponsored more proposals at Abbott than at any other Fortune 250 company, even though the company’s stock outperformed its competitors’ in both years.
Why Abbott? Perhaps because the company’s CEO, Miles White, publicly supported changes to public-employee unions’ bargaining rights in states such as Wisconsin and Illinois.
Though the DiNapoli-controlled fund has led the way in shareholder activism in 2013, historically the “leader” has been the five pension funds for New York City’s public employees. Since 2006, the city’s pension funds and Comptroller’s Office have sponsored 119 shareholder resolutions at companies in the Fortune 250, more than any other institutional investor. Eighty-nine of these proposals related to social or political issues. Only six of the 119 won the support of a majority of shareholders.
New York City’s pension expenses have also begun to squeeze the budget. City pension costs totaled $7.8 billion in 2012, 12 percent of the budget, up from $1.5 billion in 2001.
And while the NYC pension funds introduced 14 shareholder proposals in 2012, the city’s two largest funds posted dismal returns of 1.9 percent and 1.3 percent. They have also (at least before this year, which hasn’t ended yet) trailed their policy benchmarks over three- and five-year windows.
In fairness to Comptroller Liu, under his tenure the city funds have filed fewer shareholder proposals than they did under his predecessor, William Thompson. Also, unlike the New York State Common Retirement Fund, the city’s funds are governed by a multiparty board of elected officials, their representatives and union delegates.
Regardless of Liu’s culpability, both he and DiNapoli need to embrace and advocate a simple principle: Politics should not interfere with taking care of our retired cops, firefighters and municipal employees — or with the interests of the taxpayers, who ultimately must make good any fund shortfalls.
All of us deserve better.
James R. Copland directs th
e Manhattan Institute’s Center for Legal Policy, which sponsors ProxyMonitor.org, a public database of shareholder proposals at the 250 largest US companies.