Pensions and Politicians: An Interview with Assemblyman Michael Fitzpatrick

Interview by Raymond J. Keating

October 5, 2009

New York State Assemblyman Michael J. Fitzpatrick (R, I, C – Smithtown) has proposed (and plans to reintroduce) legislation that would start the long overdue process of reeling in the lavish pension benefits that New York elected officials and their political appointees receive. Fitzgerald recently did an interview with the Long Island Sentinel on the topic.

Sentinel: Lay out for us what your legislation would do.

Fitzpatrick: It’s not a lengthy bill at all. What it simply does is it carves all elected officials and all non-civil-service, appointed employees out of the defined benefit pension. It would cap the defined benefit pension plan, and convert to a defined contribution platform – a 401(k) type of model – going forward.

Sentinel: What’s the impetus behind it? Why do you think this is needed?

Fitzpatrick: Well, I would preface by saying that I have been in the system myself for 21 years. But I’m also a registered representative, and have been for 13 years, and do pension work. So, I have a familiarity with pensions, defined contribution plans, etc. And also, having spent seven years in the Assembly and 21 years as an elected official – but especially the last seven in Albany, which is where this legislation would have to be enacted – I have very strong feelings on why the place does not function, why it’s dysfunctional, and why we don’t see meaningful action taken on some very serious issues. My belief is that the defined benefit pension – and the desire for longevity in order to enhance that benefit over the longest period of time on the part of elected officials – is why we are not seeing real action on some of these issues.

Term Limits?

Fitzpatrick: Most people will tell you that the way to fix the problem is we ought to impose term limits. If you ask ten people on the street, I think nine, maybe even ten of them will tell you that we should do term limits. But term limits in my view treat the symptom, rather than the disease. In fact, term limits actually increase your pension costs. It does nothing to curb the rising costs of pensions. And I’ll tell you the reason why: That is, when you have term limits –such as the Suffolk County legislature is a perfect example – you have 18 individuals who will term limit out after 12 years, six two-year terms. Where do they go? Watch what they do next. Most of them will run for another office. They will become commissioners somewhere else, in another town or county. They will fade into the fog of the patronage system, all with the express purpose of staying in the pension system for as long as necessary, and trying to increase the salary so as to increase the pension benefit. With non-civil-service appointments, the perfect example is what happened recently with Fred Pollert in Suffolk County. Anyone in government who read that story knows exactly what he’s doing. I don’t know, Fred. I know he’s a nice guy. I’ve met him. I know he’s a good numbers guy. This has no bearing on the individual. It’s the system. At age 60, by moving over to LIPA, going from $179,000 to $200,000, if he sticks around for three more years, that’s his three-year average salary, which of course will lead to a higher pension benefit.

The Fiscal Carbon Monoxide of the Political Class

Fitzpatrick: We all pay for this. I describe it as fiscal carbon monoxide – we don’t see it, feel it or smell it, until it’s too late when we’re stuck with the bill. The political class has become its own special interest. And it will defend its interest by resisting change to the current pension system, unless there’s a hue and cry from the public to change it. That is my goal here, to start a conversation and create interest in this issue. It doesn’t guarantee that there will be change because there are other reasons to preserve the status quo. But the strongest incentive to do nothing, I believe, is the desire to stay in the job as long as possible and in the system as long as possible so as to generate the highest pension benefit in retirement. And it’s for that reason that we don’t see concrete action.

Unconstitutional?

Fitzpatrick: I’m under no illusions that my colleagues will embrace this, which is why I’m trying to go a circuitous route. I’m going to reintroduce the bill. I put it in under my own name to see who would pick this up. And I did get a call from the counsel office at the Comptroller’s office. And I spoke with one of the attorneys who said they believe it’s unconstitutional. I asked him how so. He said: Well, we believe you’re diminishing a benefit. I responded with a question – how can you diminish a benefit that you have not earned? My bill would cap the existing benefit. So, someone like myself who has been in the system for 21 years, I’ll get what I’ve earned and am entitled to when I retire at either 55 or 62 or whenever.

Aligned with the Taxpayers

Fitzpatrick: But going forward as an elected official, as someone who has a fiduciary responsibility to the taxpayers, I should align my interests with those of the overwhelming majority of taxpayers who are in the private sector and therefore participate themselves in a defined contribution plan. Why should the taxpayers continue to fund my benefit, and shoulder the risk of growing that benefit, when they also have to shoulder their own in their own 401(k)s, and in addition to that if they have college accounts for their kids, that also have suffered as a result of the recent decline in the market. So, while homeowners and taxpayers are making very difficult decisions, lifestyle decisions, because they have to replenish these funds, they also are going to be asked to dig deeper into their pockets to pay a higher property tax bill to fund these higher pension contributions that are coming down the pike. And we know they are coming. Mr. DiNapoli has already announced they’ll be coming.

Sentinel: If this were to pass, what do you think the impact would be?

Fitzpatrick: Initially, you’ll see savings in terms of how much each level of government has to fork over to fund that defined benefit pension. My bill would give a three percent contribution. So, it would be a dramatic reduction in the cost of pension contributions to every level of government for the elected or political class. So, there would be savings.

New Incentives

Fitzpatrick: I believe, also, you would realize some savings in terms of the reduction in pension abuse because you’ve taken away that incentive to come to government. You discourage people from looking to government first because the benefits are so great. If you’re going to pay your own way in government by way of a 401(k)-style pension program, then maybe someone will think twice before coming into government. You’ve reduced that incentive.

Different View of Governing Decisions

Fitzpatrick: You also create a climate where elected officials now that their future benefit depends on the health of the economy and the stock market, maybe they will think twice before they give away the store to the unions and the other interest groups by way of pension sweeteners, mandates and things like that. I think you will attract people who have a different belief system, and perhaps a different set of incentives, who want to get into government to solve problems, not necessarily to say: Hey wait, this pension deal is pretty good, I want to stick around as long as I can, and therefore, I put my finger to the wind and say which way should I go if I want to stay here. You decrease the incentive to do that. So, I think those are the principle reasons why it’s important.

Moral Argument

Fitzpatrick: I think you can even make a moral argument that the taxpayers of this state, as elected officials we should lead by example, that they should not be paying for our benefit. Other public employees – the police, the fire fighters, etc. – they have a defined benefit plan. There is a proposal for a Tier 5, which is still a defined benefit option. But for elected officials, we should not be entitled to a defined benefit pension. We should pay our own way, lead by example, serve the taxpayers first, not ourselves. As long as there is a defined benefit pension option, or eligibility for elected officials, our interests are not aligned with the people who pay the bills – the taxpayers.

Sentinel: Who stands in opposition – other than the political class? The public sector unions?

Fitzpatrick: I’m eager to have the conversation with the public sector unions. My bill does not affect them at all. So, they shouldn’t have anything to say, so to speak, in terms of whether they should be in favor or opposed to this. They may think that if it can happen here it can happen to them. Well, the fact of the matter is that in other states, they are already looking at a defined contribution option as a new tier for new hires… I think down the road, and I’ve said this in conversation with people, I think you will ultimately see a defined contribution plan for new hires. Can’t say when. But I strongly feel that eventually this is going to happen. But what has to happen first is carving this benefit out and putting the political class in a defined contribution platform. No one gets hurt. No one gets anything taken away from them. You don’t diminish the benefit because you are simply capping it. You’ll get what you’ve earned. But going forward, you’ll still get three percent from the employer, but you’re going to pay your own way like everybody else.

Put the Heat on Legislators

Fitzpatrick: How do you respond to an editorial board or a question from the public that says: Hey, there’s a proposal on the table, where do you stand on getting out of the defined benefit pot and going into a defined contribution pot like everybody else. Why should I have to pay for your benefit Mr. Senator, Ms. Assemblywoman? Why? I look forward to hearing those responses. Because if somebody says you won’t get good people in government, I’ll say, gee, under the current system we have great people now? We’re solving our problems? And taking those bold steps? Sticking their necks out? Come on. That’s nonsense.

Change the Rules of the Game

Fitzpatrick: People think term limits are the answer. It really isn’t. People don’t leave government. And the reason they don’t leave government is because of the pension, the defined benefit pension. If you want term limits after you put in a defined contribution pension, that’s fine. You may still want to do that. That’s okay with me. But term limits without pension reform is just going to drive your costs up even higher because you’re not going to change the behavior of the political class unless you change the rules of the game. Changing the players doesn’t change a thing.

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Raymond J. Keating is the publisher and editor of Keating Reports and the Long Island Sentinel. Keating can be contacted at keatingreports@aol.com.

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