This month, something deemed unthinkable in New York happened in Detroit: Retired government workers agreed to have their pensions reduced.
Last week these public workers voted to have their pensions cut by as much as 4.5 percent and their automatic cost-of-living increases scaled back. They did so as part of a restructuring plan designed to help Detroit back on its feet.
Above all, they did it because these retired workers calculated that unless they accepted this deal, a far less friendly one would be imposed on them.
Now, New York is not Detroit. Our economy is stronger and more diverse, our finances are in better order and we don’t have near the dysfunctions that sent this onetime industrial power to bankruptcy court.
But Detroit is a warning.
A year ago, then-Mayor Mike Bloomberg put it this way:
“The reality is we may be a long way from Detroit, but we are only a short distance from relapsing into decline if we allow health care and pension benefits to crowd out the investments that make New York City a place where people want to live, work, study and visit,” he said.
Bloomberg singled out health care benefits, pointing out that 95 percent of the city’s public employees pay nothing toward their health insurance.
No doubt he had on his mind a report from the comptroller’s office noting the city is on the hook for $71 billion for the health care promises the city’s made to its workers.
The same report shows that we’ve only funded about $2 billion of this. In plain English, something’s gotta give.
Bloomberg said that Detroit went bankrupt by “avoiding the hard choices.” He’s absolutely right there.
So as these Detroit retirees make a hard choice that became harder because everyone looked the other way until it was too late, it should worry taxpayers and public workers both that, when it comes to unsustainable benefits, this is one thing Gotham and the Motor City sadly have in common.