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PENSION REFORM IN NEW YORK AND NEW JERSEY: HOW IT AFFECTS YOUR POCKETBOOK PART II

02/09/2012

   I thought that one article would be enough to deal with the pension mess that currently holds sway in New York and, to a lesser extent, in New Jersey.  After reading the latest opinion piece in Crain’s New York Business, dated February 6, 2012, I decided to spend the time to prepare a second column relating to this on-going problem.

   The run away state budget is costing New Yorkers significantly increased taxes and causing large budget deficits which have to be closed one way or another.

   The debate over pension reform in New York is currently at a fever pitch.

   Greg David, one of the columnists at Crain’s, has exposed the truth regarding the current New York State Common Retirement Fund.  In a nutshell, the average pension of recent retirees is $45,703 for teachers and $61,295 for policemen and firemen.  These recent retirees are the ones that are driving up the pension cost to unsustainable heights.  New York City Controller John Liu recently issued a report on New York City pensions.  He noted that it would take an IRA of $825,000 to generate the same income, as a New York City retiree retiring at 62 would currently receive from his pension.  A police officer retiring at the ripe old age of 51 would need a $1.1 million IRA to generate the income equal to his current pension.  Compare that to the median retirement assets of New York State residents who have IRAs and are near retirement:  a whopping $67,000!!!

   Crain’s concludes, “What this means is that teacher, police and fire retirees are the real 1%” (meaning the wealthy 1% that recent protests have been attacking with vehemence across the country).

   These pensions are paid for by all of us.  We pay higher taxes across the board, as a result.  As I said last week, the cost is exploding.  New York City pension costs will be $8.4 billion in 2014, up from $2.4 billion in 2004 – an unsustainable growth rate of 14% per year.

   New York State and local governments and school districts’ pension costs are also expected to grow to $2 billion in 2014 from $455 million in fiscal 2004.  An annual growth rate in excess of 12%.

   In another article entitled, “Owners Weigh Issues As Race Heats Up,” Crain’s describes how local, small business people are getting involved in this year’s elections, on both the national and state level.

   Many business owners are annoyed at “unfair government involvement in small businesses.”  These include onerous regulations that make it difficult to run one’s business including the spiraling cost of health care under the Health Care Reform Act passed by President Obama.  Failure to have access to capital from most bank institutions is another complaint.  Top it off with overwhelming government regulations in many sectors.  Then you have the recipe for producing a great deal of anger in the small business community.

   Crain’s reports, “There is a tremendous amount of uncertainty for small business owners about what their health insurance costs will be” in the immediate future.

   I can tell you that paying $24,000 in medical insurance premiums for each of several key staff people does, indeed, hinder my ability to add additional positions to my business.  It is amazing, but a recent survey by Yahoo:  Small Business Claimed that 34% of Small Business Owners with fewer than 100 employees deemed the federal government the biggest obstacle to growth.

   The perception among business owners is that Democrats are too heavy-handed with imposing regulations.  One of the business owners interviewed told of a horror story where last year one of her employees left after six weeks.  Even though she quit, regulators required the owner to pay unemployment benefits.  Ms. Stoner, the business owner, said, “Regulations like that become huge disincentives to hire.”

WHAT ARE OUR OPTIONS?
 
   Each one of us, as a small business owner, can undertake the following actions:
•    Support your candidate for President with contributions and lobbying for the election of the right person.
•    Make sure that your local politicians share the same economic goals that you do.  Attend their fundraisers and make your voice heard.
•    Start a group of your own, a form of political action committee, to promote the agenda that you find important.
   It is not time to give up.  It is time to get involved and stand up for what is right.  If you don’t try to change things, then you will be doomed to suffer the consequences of the actions of our local and national politicians.
 
 
 

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