New York City’s actual pension liability stands at $142 billion – far beyond what’s officially reported – according to a report by the Manhattan Institute for Policy Research.

Official reports peg the city’s gap at $65 billion.

For the study by free-market leaning Manhattan Institute, titled “The Never-Ending Hangover: How New York City’s Pension Costs Threaten Its Future,” adjunct fellow Edmund McMahon and senior fellow Josh McGee use market-rate discounting, which they say most independent actuaries and economists use.

“The city cannot afford to stand by and hope for the best: without significant action, these retiree costs pose a significant risk to New York’s fiscal future,” said the report. “The city has been spending more to meet its pension obligations than to build and renovate bridges, parks, schools, and other public assets.

The city’s five pension plans are the New York City Employees’ Retirement System, the Teachers’ Retirement System of the City of New York, the New York City Police Pension Fund, the New York City Fire Department Pension Fund and the New York City Board of Education Retirement System.

Valued at $175 billion, the funds have more than 700,000 members.

“Our reporting is in full compliance with Government Accounting Standards Board requirements, and, as the report makes clear, we’ve hit our target returns over the last three years," said Jack Sterne, a spokesman for New York City Comptroller Scott M. Stringer. "All of this comes as we’ve modernized our investment operation and doubled-down on compliance, risk, and oversight roles.

"New Yorkers’ pensions are in good hands. The rating agencies have consistently showed that.”

Moody's Investors Service rates the city's general obligation bonds Aa2. Fitch Ratings and S&P Global ratings each assign AA. All three assign stable outlooks.

Two weeks ago, Stringer and the trustees of the pension funds announced that the city became the nation’s first major public pension system to fully divest from private prison companies. Stringer said the move to liquidate the city’s investments in private prison companies follows reported incidents of alleged human rights abuses across the private prison industry.

Since mid-May, Stringer’s office and the pension funds have sold about $48 million of stock and bonds from three private prison companies — GEO Group, CoreCivic (formerly Corrections Corporation of America) and G4S.

McMahon and McGee recommend two short-term steps: reduce investment-return assumptions they consider overoptimistic, as independent actuarial consultants recommended in 2015, and tap into reserves earmarked for the next round of contract settlements to fund the $655 per year in required additional pension contributions.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.