What Are Illinois's And Chicago's Options After The Latest Pension Ruling?

Last May I reported on a decision from the Supreme Court of Illinois that struck down as unconstitutional (under the Illinois State Constitution) a pension reform law that the Illinois legislature had enacted in 2013 in an attempt to rescue the state's woefully underfunded employee pensions.  A few days ago another Illinois statute, this one enacted in 2014 and intended to effect a similar rescue of various pension plans of the City of Chicago, reached the Illinois Supreme Court, and promptly met the same fate.  Here is a copy of the court's new decision.    

How badly funded are Illinois's employee pension plans?  Even though they put out regular annual reports, it's hard to get an exact handle on that because the reports are so lagged.  This article from Crain's Chicago Business from October 2015 takes numbers from the then-recently-issued annual reports for 2014.  According to the article, as of the end of 2014 the Illinois pension plans were the worst-funded of any state's in the country, at 39.3%.  That's the most recent number we have, now about 15 months old; but that was after the big run-up of the stock market in 2014.  From the beginning of 2015 to now the market has been nearly flat (as against assumed annual returns of 7-8%), and Illinois and its municipalities have continued to fail to put in so-called "actuarially required" contributions.  The funds could easily be less than 35% funded today, maybe even closer to 30%.  At that level, no amount of a booming stock market by itself will ever rescue these funds.

The hurdle that the rescue statutes need to clear is the provision of the Illinois Constitution (Article XIII, Section 5) that reads as follows:

Membership in any pension or retirement system of the State . . . shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.

As I pointed out in the May 2015 article, the best hope the legislature would have of trying to meet the constitutional test would be to pass a statute that explicitly protected all benefits accrued up to the effective date of the statute, and altered only benefits going forward from that date.  But, for reasons that I don't understand, the legislature did not attempt to meet that criterion in its initial 2013 statute, nor did it try to meet the criterion in the 2014 statute at issue in the new case.  For example, as set forth in the Supreme Court's decision,

The provisions in Public Act 98-641 . . . reduce the value of annual annuity increases, eliminate them entirely for certain years, postpone the time at which they begin, and completely eliminate the compounding component. The Act expressly states that these changes “apply regardless of whether the employee was in active service on or after the effective date of this amendatory Act."

In other words, they tried to cut pension payments even for those who had already retired, and therefore whose pension benefits, like it or not, were already fully accrued.  In partial defense of the legislature, this statute had already been enacted at the time of the Illinois Supreme Court's prior decision in 2015.  But still, I would have thought they would at least have made an effort to segregate out those cuts that only applied to as-yet-unaccrued benefits, in an effort to get those sustained; but they did not do that.

And now, with two rather angry and impatient, and unanimous, Illinois Supreme Court decisions on the books, the prospects for getting the court to recognize the already-accrued versus yet-to-be-accrued distinction have to be diminished.  Pension crises move with agonizing slowness, but some are predicting that the earliest of the Illinois funds to run out of money and start bouncing checks could hit that point in the early 2020s.

So Illinois has now lost three full years in its attempts to reform its pensions, and with each passing year its options get fewer and worse.  Of course, what the employee unions want is massive tax increases.  Short of that, what's left?

• A reform that recognizes the already-accrued/yet-to-be-accrued distinction.  At this point, such a reform would basically have to end future accruals, perhaps by replacing the defined benefit plans entirely with defined contribution plans.  The Illinois Supreme Court should approve this, but that doesn't mean that they will.
• Massive firings of senior employees and replacing them with new employees who have only defined contribution plans.
• Or, Illinois and Chicago can just stop putting money into the plans and see what happens.  When New Jersey recently tried that approach, its Supreme Court upheld the governor.  Will Illinois's do the same?

Meanwhile, Chicago's population, after what had seemed to be a turnaround, appears to have resumed its long-term decline.  Chicago's population reached its peak in 1950 at 3,620,962, and then went into an extended decline.  By 1990 it was 2,783,911.  After a small recovery in the 90s, decline resumed.  By 2010 the population was 2,695,598.  The Census Bureau has not yet released a 2015 estimate for Chicago, but just a few days ago it released an estimate for Cook County (the county that includes Chicago) that showed the entire county losing population.  Previously, Chicago's losses had been more than offset by gains in the remainder of Cook County. 

If you move your business into Illinois or Chicago, you voluntarily agree to take on the burden of the underfunded pensions, meaning that you agree to pay taxes now and in the future for services that were rendered in the past when you weren't around.  Now, why would rational people do that?

Are "Trade Deals" Really The Problem In Galesburg, Illinois?

I don't mean to be overly bashing the New York Times lately -- there are plenty of other media outlets that are just as bad -- but sometimes it's unavoidable.  Yesterday they had a big front-page article titled "Town's Decline Illustrates Peril Of Trade Deals," by Binyamin Appelbaum.  The article is about Galesburg, Illinois, its long decline, and the causes of that decline.  Or I should say "cause" (singular), because exactly one cause is discussed, namely "increased foreign trade."  Does that really explain anything at all about what is going on here?

Now there is no doubt that Galesburg has declined.  Wikipedia here helpfully collects decennial census data, showing that Galesburg reached a peak population of 37,243 in the 1960 census, and was down to 32,195 by 2010.  Much discussion in the Times article concerns a large Maytag factory in Galesburg that closed in 2004, when a large part of its production moved to Mexico:

In 2004, Maytag shut down the refrigerator factory that for decades was Galesburg’s largest employer and moved much of the work to Mexico. Barack Obama, then running to represent Illinois in the Senate, described the workers as victims of globalization in his famous speech that year at the Democratic National Convention.  A decade later, many of those workers are still struggling. The city’s population is in decline, and the median household income fell 27 percent between 1999 and 2013, adjusting for inflation.

Permit me to point out a couple of problems with the thesis that Galesburg's woes have been caused by "trade deals" and "globalization."

• Which "trade deal" are you blaming for Maytag moving these jobs to Mexico?  NAFTA?  That was 10 years earlier in 1994.
• Even if the closing of this factory could be directly attributed to some "trade deal," or to "globalization" more generally, the problem is that lots and lots of places have lost lots of manufacturing jobs without declining overall.  Exhibit A of course is New York City.  Here in New York we had over 1 million manufacturing jobs in the 1950s.  Today there are about 75,000.  But the total number of jobs is up significantly, recently setting all-time records of around 3.6 million.    So all of the manufacturing jobs and then some have been replaced by other jobs, and in fact much better jobs, mostly much cleaner and cushier white collar and office jobs.  I'm certainly not meaning to hold up New York City as a model of a good business climate to attract jobs.  But New York City is definitely a complete disproof of the thesis that loss of manufacturing jobs to foreign competition dooms a city to economic decline.  Los Angeles would be another such example if any were needed.

Let's face it, trade deals or no, globalization or no, every factory sooner or later is going to close.  Even if the Chinese can't make the stuff cheaper, eventually someone will come up with a better product, or a cheaper way of making the same product, or the equipment in this factory will wear out, or this company will hire incompetent managers who run the place into the ground, or something else.  No town can maintain itself over the long pull by just hoping to hang on to the exact same set of factories forever.  To maintain yourself and grow, it is essential to attract new businesses.  And that requires one very simple thing, which is a good business climate.

Does Illinois have that?  No.  What are the problems?  There's nothing very complicated about this:

• Overall state/local tax burden.  The most recent (2011) Tax Foundation data put Illinois at #13 out of 50 states, which is bad but not disastrous.  (Numbers 1 through 4 are NY, NJ, CT and CA respectively).  But perhaps more relevant to Illinois's situation is that almost all the states around it are lower, including Ohio (#18), Michigan (#21), Indiana (#22), Kentucky (#23), Iowa (#29) and Missouri (#33).  The only neighboring state ranked higher is Wisconsin (#5), and there they have been cutting taxes aggressively under Republican leadership of recent vintage.
• Pension burden.  By this time almost everybody knows that Illinois has the worst unfunded pension problems of all 50 states.  And just last week the Illinois Supreme Court basically declared unconstitutional any effort to fix the problem short of massive tax increases or firing all state employees en masse.
• Illinois is not a right to work state.  Neighboring Michigan, Indiana, Iowa and Wisconsin are right to work states.

So if you have an idea for a new factory and money to build it, are you going to invest it in Galesburg, Illinois, where you will be a sitting duck for high current taxes, big coming tax increases and predatory unions?  When you could just as easily go to any of those neighboring states and avoid all those problems?

Sorry, New York Times, but "trade deals" and "increased international trade" have next to nothing to do with the woes of Galesburg, Illinois. 

Illinois's Pension Reform Goes Down In Flames

On Friday the Supreme Court of Illinois unanimously declared unconstitutional, under the Illinois State Constitution, the 2014 pension reform law by which Illinois's legislature had sought to bring the state's pension costs under control.  The whole exercise represents a major lost opportunity for Illinois, and for the cause of state pension reform generally.  

The decision of the Illinois Supreme Court is here.  The basis of the decision is that the attempted reform, embodied in a statute called Public Act 98-599 (effective 2014), violated Article XIII, Section 5 of the Illinois Constitution that reads:

Membership in any pension or retirement system of the State . . . shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.  

In the face of that provision, the Illinois legislature enacted a statute that reduced the pension annuities that state employees could earn over the course of their careers, without making explicit that pensions already earned as of the date of the statute were protected.  It's not possible to know how the court would have come out if the legislature had explicitly protected all pensions already earned.  Perhaps this court would have come out the same way, particularly given the level of anger and hostility evident in its opinion.  But if the legislature had taken the route of explicitly protecting all pension earned to date, they would have had a powerful, and ultimately correct,  argument that what they were doing did not violate the constitutional provision.  Even if they had lost this case, they would have had a more than good shot of prevailing in the long run.  Now, it's back to the drawing board.

As enacted, this statute appears to reduce both pensions earned before its effective date and also subsequent accruals.  Here is a list from the Supreme Court opinion of some of the changes:

First, it delays, by up to five years, when members under the age of 46 are eligible to begin receiving their retirement annuities. . . .  Second, with certain exceptions and qualifications, it caps the maximum salary that may be considered when calculating the amount of a member’s retirement annuity. . . .  Third, it jettisons the current provisions under which retirees receive flat 3% annual increases to their annuities and replaces them with a system under which annual annuity increases are determined according to a variable formula and are limited. . . .

Without explicit protection of pre-enactment accruals, the state was left in the position of having to argue that it could use its police powers to override pension contracts -- in the face of a specific constitutional provision protecting the pension contracts (not to mention a provision in the federal Constitution barring states from impairing rights under contracts).  Here is the state's brief in the Supreme Court.  I can't say I'm surprised that the Supreme Court did not buy the state's argument, which would essentially mean that the state could ignore the clear constitutional provision by the simple of expedient of declaring some kind of "emergency" whenever it wants to spend the money on something else.  Moreover, the court seems to have been particularly offended by the fact that the statute exempted judge's pensions from the reforms.  Although the legislators may have thought that they would buy the judge's support by the exemption, the judges were smart enough to realize that if they upheld the reforms for everyone else, then the reforms could be extended to judges the next day.

So Illinois is now in the position of having to start over in the face of a hostile and skeptical Supreme Court.  Worst is that the distinction between pensions accrued-to-date and future accruals was never clearly presented in this case.  Not explicitly protecting already-accrued pension benefits was a huge mistake by the Illinois legislature.  That omission took away from the state the potential winning argument and also led to sloppy language in the Supreme Court's opinion that may suggest that the constitutional provision protects future accruals. For example, here is a quote from page 20 of the opinion:

Accordingly, once an individual begins work and becomes a member of a public retirement system, any subsequent changes to the Pension Code that would diminish the benefits conferred by membership in the retirement system cannot be applied to that individual.   

But is it really the case that the Illinois constitutional provision (and comparable provisions in many other states including New York) means that an employee who begins work for as little as one day at age 25 is then entitled to have his pension accruals continue at an undiminished rate for an entire career of 40 years or more, even if those accruals are at a completely unsustainable level for the state and its taxpayers?  The obvious flaw in this logic is that the obligation to pay for pension accruals based on future service does not yet exist, and the state has not committed itself to make such an obligation come into existence.   The constitutional provision protecting pensions does not give an employee a constitutional right to have his job. Therefore, he can be fired, or can quit, before earning additional pension benefits.  So a reduction limited to future accruals does not "diminish or impair" anything to which the employee has an existing contractual right.       

Where does Illinois go from here?  The Supreme Court's opinion does not actually direct the legislature what to do, and only enjoins implementation of the statute previously enacted.  But the court seems to think that the legislature will now only have one option, which is to fully fund the pensions under existing accrual rules, raising taxes to the extent necessary to do so.  I see several other options:

1. The legislature can do what it should have done in the first place, and enact a new statute explicitly protecting prior pension accruals while reducing future accruals.  Without doubt the same cast of characters will challenge such a new statute.  But the new statute will make the court focus this time on the distinction between past and future accruals and either allow the future reduction or take the extreme and ridiculous position that one day of work for the State of Illinois brings with it a lifetime entitlement to a given pension scheme.
2. The state could start systematically getting rid of (laying off) senior employees with unsustainable pension accruals and replacing them with new employees with much reduced pension promises (or perhaps, defined contribution plans).  Will the Illinois Supreme Court then hold that employees have a constitutional right to their jobs, even if the constitution has no such provision and the senior employees with unreduceable pension accrual obligations cost double or more the cost of replacements?
3. Or then there's the option that seems to be the choice of New Jersey: just stop putting money into the pension plans and see what happens.  The Supreme Court can declare a statute unconstitutional, as it has done here, without too much stress; but it is quite another thing for a court to order a legislature to appropriate money.  It is likely (but not certain) that the court will pull back before taking that step.  According to the Supreme Court opinion, the state pension plans at issue are currently about 41% funded.  And that's with the stock market at record levels!    With no additional contributions, one good stock market crash could have these pension plans bouncing checks within as little as ten years.  Bring it on!

Or Illinois can do what the court wants and raise taxes greatly to try to rescue these badly underfunded plans.  That course would risk putting Illinois into accelerating economic decline relative to its neighboring states.  And Illinois is already the economic laggard in its Midwestern neighborhood.  I say, try one of # 1, 2 or 3.

Are New York City's Pension Plans In Trouble?

It's hard to be a doomsayer on public pensions, because the process of collapse moves so slowly.  Even if a given pension system is definitely in a death spiral from which no exit is possible, it still may be 20, 30 or even 40 years before the final collapse when the pension checks actually start to bounce.  That's just too long to maintain any kind of a sense of crisis.  Meanwhile the pension systems provide the perfect slush fund for politicians to play with, making promises to the people who put them in office, completely secure in the knowledge that the bill will come due long after they themselves are gone.

And thus we have new New York City Comptroller Scott Stringer, one of the trustees of each of the City's pension plans, coming out with a big press release last week touting the great performance of the City pension plans on his short watch:

New York City Comptroller Scott M. Stringer announced today that the New York City Pension Funds achieved a 17.4 percent investment return for Fiscal Year 2014, which ended June 30th.

Stringer also noted the strong performance of the funds over the previous four years, going back to 2010.   The result: more money for the City to spend on other programs!:

The pension investment returns from FY 2014 will lower the City’s pension contributions beginning in FY 2016, resulting in cumulative City savings of $17.8 billion  phased in over a six-year period with each year’s incremental savings repeated for 15 years.

So I guess there's no problem here!  Stringer's press release contains no mention of funding levels of the various plans (New York City has five), nor any discussion of whether the current level of pension promises is sustainable in any sense.

The New York Times, to its credit, promptly came out with a long front-page article on Monday August 4 taking a much deeper look at the City's pension situation and coming to an overall very pessimistic view.  Other articles critical of the City pension situation came from Greg David of Crain's and Megan McArdle of Bloomberg on August 5. 

While the Times article is not directly addressed to or critical of Stringer, it contains plenty of data to make Stringer's statements appear, frankly, ridiculous.  For example, while Stringer cites data on investment returns only from the last 5 years (2010 - 2014) during which the stock market has performed strongly, the Times points out that returns from 1999 to 2009 averaged only 2% per year.  That is a big, big problem for systems that at the time were calculating contribution and funding levels based on an assumed 8% rate of return.  And then the Times has a big chart showing contributions and funding levels  for 2003 - 12 for the biggest of the five plans, the so-called Employee Retirement System, now based on a new investment return/discount rate assumption of 7%.  In summary, for that plan over that period:

• Assets have gone from about $32 billion to about $47 billion.
• Contributions have been about $20 billion.  Do the subtraction and you see that contributions have exceeded the overall growth of the fund, meaning that all investment returns and then some have been consumed by payouts of pensions to beneficiaries.
• The present value of benefits accrued to date (7% discount rate) has soared from about $49 billion to about $104 billion. 
• Therefore the funded ratio (7% discount rate) has gone from about 65% to about 45%.

And now here's a calculation the Times does not do, but is important.  If you think a more proper discount rate would be 6%, or even 5%, what would the funded ratio be?  Assuming average duration of liabilities of 15 years (which I think is short) that would mean that liabilities at 6% would be around $120 billion and the funded ratio 39%; and at 5% the liabilities would be around $138 billion and the funded ratio around 34%.  

About the best you can say about this is that New York City, largely for having made very large contributions to these plans over the last decade, is in substantially better shape than, say, Chicago or Los Angeles.  On the other hand, as I have said many times, when you are in a Ponzi scheme, the best thing you can hope for is that it will collapse quickly; the alternative is that you spend more and more money to keep it going, only to have a much bigger and more horrible crash in the end.

In the face of this, Stringer's strategy is to fail to mention the funding situation at all, and to declare that more money is now available to spend!  And de Blasio?  According to the Times:

Mr. de Blasio, notably, did not mention the word “pension” during his hourlong budget presentation in May.

While there is lots of good data in the Times article, the big picture is that its main criticism of New York City's current pension situation is that a switch of higher risk investment vehicles (largely hedge funds) to chase higher returns has not notably increased returns but has notably increased fees.  The most recent number they give has fees running about 0.5% of invested assets, up from only about 0.1% earlier when the funds invested in less exotic stuff.  That is indeed real money, with lots of opportunity for graft. 

However, it is not the big problem.  The big problem is unsustainable pension promises, including retirement ages in the 50s or even 40s following working careers as short as 20 and 25 years in most cases.  Do even the simplest math and you realize that, as these promises work their way through the system, pension costs are going to exceed, and indeed far exceed, the costs of active employees.  No amount of magical returns from the stock market, or from hedge funds, can fix that problem.  

And that's the problem that de Blasio and Stringer will not even talk about.  I'm not sure they've even figured it out.    Prior Mayor Bloomberg had figured it out and did talk about it.  Also in the category of those who have figured it out are members of the bureaucracy, but they badly want for the problem not to be discussed, at least until they are collecting their own pensions. 

I'll close with this from the Times:

In the existing environment, important questions about cost and sustainability can be broached only with great diplomacy. In 2010, Blackstone Advisory Partners, a private equity firm, found out what can happen otherwise. On a conference call with investors, a company official answered a fiscal question by saying retirement benefits for public workers across the country were excessive. When New York City’s trustees got wind of the comment, they called for Blackstone’s chairman to apologize in person. A few months later, he did, and when that proved insufficient, Blackstone issued a statement saying it opposed “scapegoating public employees.”

Of course, the financial guys who work with the pension funds are among the very few people in the City who understand how these things work.  Shut them up, and you have a really good shot of keeping the whole subject of unsustainable pension promises out of the public debate.  And there are several hundred million of annual dollars in investment advisory fees for these funds to be used in the shutting-up project.

A couple of bad stock market years in a row and we could easily see the City's required pension contributions doubling to 20% or more of the budget.  Meanwhile, our current leaders fiddle.

What's The Right Answer For New Jersey's Public Pensions?

Most of the "blue" states, and a few of the "red" ones, have unsustainable defined benefit pension plans for public employees; but the problem has been well hidden from the voters by the politicians who put these things in place.  By the time the problem gets fully recognized, the hole is really deep.  And don't expect any help from the public employee unions in getting out of the hole -- they will gladly bankrupt their state to fight for the last penny for the pensions.  Hey, that's their job.

The recent stock market run-up has temporarily rescued many of these plans from immediate crisis, so the issue has somewhat receded from the news.  But not in New Jersey, home of some of the worst problems.  There the pension issue has been at the heart of the recent budget battle between Republican Governor Christie and a Democrat-controlled legislature.

While New Jersey's plight may not be the worst among the states (Illinois and California come to mind), its situation is pretty bad.  Here is a roundup of the official asset and funding status of New Jersey's various plans from the website ballotpedia.  It seems that New Jersey governors and legislators have several times adopted the expedient of skipping required pension contributions in order to close what otherwise would be budget deficits.  Recently, only 32% of the 2010 payment was made. This is a very good way to get your pension plan into a death spiral.  The status per most recent official numbers is 64.54% of obligations funded, leaving $47.2 billion of unfunded liabilities.  This against a total state annual budget of $32.5 billion.

If you are interested in inter-state comparisons, ballotpedia cites data from Moody's as ranking New Jersey 4th worst among the states in the ratio of unfunded pension liabilities to annual state revenue (137.2%) and 8th worst in the ratio of unfunded pension liabilities to state GDP (13.0%).  Of course, that's if you believe the official numbers for pension liabilities, using discount rates of about 8%.  A group called State Budget Solutions (SBS) has helpfully done a recalculation of New Jersey's liabilities at a very conservative interest rate of 3.2%, and they come up with unfunded liabilities for New Jersey of $171.7 billion (cited in the ballotpedia article).  That would make the unfunded liabilities a good 5.3 times annual state revenue, and the funded ratio of the plans more like 32%.

Christie put through what was labeled as a big pension reform in 2011, described here in a Wall Street Journal article by Josh Dawsey and Heather Haddon on July 1.  Under that reform supposedly the state was going to contribute around $2.25 billion per year to gradually catch up.   Well, according to SBS here, Christie's just-signed budget includes only $691 million for the pensions.  According to Christie, revenue came in below projections, and there just isn't enough money for the pension catch up funding.

Needless to say, the public employee unions are up in arms.  They promptly filed a suit and sought an injunction, but a state judge has already given preliminary approval to Christie to do what he is doing.  The solution offered by the unions and by prominent Democrats in the state legislature has been to raise the tax rate on high earners yet again.  The legislature passed that, but Christie vetoed it.

But the question is, what is the right answer here for New Jersey?  The Democrat/union proposal of higher taxes may work for one year, but New Jersey is highly likely to be in a pension death spiral situation already.  Unless the stock market performs miracles, the supposedly required pension contributions will keep increasing year after year, probably faster than the economy can hope to keep up.  In this kind of situation, can you increase the taxes on the same people year after year and expect them to stick around?

I submit that if you should find yourself in a Ponzi scheme, the best thing that can happen is to have it crash as quickly as possible.  And the biggest mistake you can make is to keep feeding it as you dig deeper and deeper into a hole from which you can never get out.  This would imply that it is actually a sensible strategy to quit making the pension contributions, thereby accelerating the crash.  The crash will come when there is still a large productive economy in New Jersey, and as the crash approaches, the public employees will be forced to the negotiating table to accept retirement contributions at a sustainable level.  Defined contribution plans anyone?  

Trying To Understand The Progressive Agenda

Many on the Left are excited by our new Mayor Bill de Blasio.  Yesterday in his first budget presentation as mayor he emphasized once again that he intends to govern as a "progressive."  Here is Brent Budowsky in The Hill yesterday channeling the excitement:

[T]he left is lifted by the possibility that he could evolve into a modern-day Robert Kennedy or a New York City FDR, turning city government into a laboratory for big ideas put into action.

Well, forgive me, but I'm trying to get a handle on what the progressive program actually is and how it could possibly work, and I just can't figure it out.  When I listen to the self-described progressives, I hear soaring rhetoric about fairness and the crisis of income inequality.  But when I look at the actual programs proposed, every single one of them looks to do absolutely nothing about "fairness," absolutely nothing about income inequality, and instead constitutes a giveaway to one or another favored constituency, almost always labor unions that provide political support, and whose members are nearly all well into the top half of the income distribution.

Granted, I'm about the farthest thing from a progressive, but I'm trying to look at the world from their perspective.  If you take their rhetoric at face value, the overriding problem of the world today is the unfairness of unequal distribution of economic goods by the capitalist system.  In his victory speech after winning the election, de Blasio called income inequality "the defining challenge of our time."  President Obama used the exact same phrase -- "defining challenge of our time" -- in talking about income inequality in his speech on December 4.

Well, if I were a progressive, and my overriding concern was income inequality, the first thing I would do is recognize that addressing this problem in a way that would meaningfully swing the numbers will take huge resources, and we have limited resources, so we must use every dollar effectively in order to have enough to address income inequality.   I would also insist on getting accurate data on real income inequality so that I would have some metrics to know whether anything I did was working.  For example, I would insist on correcting the fraudulent data currently used by the government by which nearly $1 trillion annually in in-kind handouts to low income people are excluded from income data, and the incomes of high earners are counted pre-tax even though they pay half or more of that income to the government already.  And finally, I would apply whatever spending I could muster for curing income inequality to a program that actually raised the measured incomes of the poorest people.

Applying these principles to actual programs, the first thing I would notice as mayor of New York is that we are way overspending on unsustainable pensions and health benefits for employees -- over $17 billion in the budget put forth yesterday, almost 23% of the entire $75 billion budget, and fully a third of the $52 billion portion funded by city taxes.  The second thing I would notice is that we are spending about $20,000 to educate each public school child for a year, while the rest of the country does it for about half that.  Those two things alone constitute about $15 billion of annual overspending of city taxpayer funds when the entire city tax system only raises about $52 billion.  In other words, vast overspending on these major items -- all of which goes into the pockets of the union supporters of de Blasio -- crowds out more or less any hope of making a dent in income inequality.  Overspending on Medicaid (by comparison with competitor states like California and Texas) is another several billion.  I just can't think of how you can say that income inequality is your top priority when you let this kind of big money just slip away.

Nicole Gelinas of the Manhattan Institute has an op-ed in today's New York Post about de Blasio's budget presentation, headlined "Mayor goes minor-league," the theme of which is that he "missed the big picture."  Yes, and then some.  Not a mention of overspending on worker pensions or health benefits or public education.  Instead he talked about things like another $35 million for snow removal and $3 million for an inspector general for the Police Department.  OK, those things are a fraction of a tenth of a percent of the budget.

But de Blasio continued to show that he has no idea that resources are finite and you can't just throw money away on waste and expect to have anything left over for important things, let alone for massive projects like income inequality.  So, for example, Bloomberg had proposed saving $59 million by closing surplus firehouses.  That's appropriate and necessary -- fires in New York City are down by well over half since the early 90s according to Fire Department data here, but community opposition keeps all the firehouses open even with no fires to fight.  Well, that's another $59 million that won't be addressing income inequality, and instead will go to the unionized firemen.

And how about two more de Blasio signature causes, hospitals and pre-K education.  Long Island College Hospital continues to lose about $13 million per month, and is projected to lose over $200 million over the course of three years of ownership by SUNY.  Granted this is state rather than city money.  But remember, there are next to no patients in this hospital; the money just goes to de Blasio's SEIU healthcare union allies to do nothing.  Universal pre-K similarly cannot possibly have any measurable effect on income inequality until the beneficiaries enter the labor force 20 years hence; but in the meantime the teachers union gets thousands of new dues-paying members.

If the actual agenda is to address income inequality, none of this makes any sense whatsoever.  If the actual agenda is to pay off political supporters for putting you in office, then it makes sense.  Or maybe a progressive can offer me an alternative explanation.