Cuomo Proposes Plan to Slash N.Y. Public Pensions, Labor Furious

Governor Andrew Cuomo has proposed a plan to reform the New York public pension system that has public employees unions clamoring.

New York Governor Andrew Cuomo on June 8 introduced pension reform legislation that aims to tackle what the governor called the state’s “skyrocketing pension burden.” “The numbers speak for themselves – the pension system as we know it is unsustainable,” Governor Cuomo said in a statement.

The proposed reforms aim to raise the retirement age from 62 to 65, end early retirement, require workers to pay more for their pensions, and crack down on the practice of pension “spiking.”

The bill will save $123 billion over the next 30 years, according to its proponents.

New York City Mayor Michael Bloomberg applauded the bill in a statement, saying it “will ensure we can afford the services and workforce that City residents depend on, and provide a secure retirement for municipal employees long into the future.” Bloomberg has previously supported major pension reform, aiCIO reported. Cuomo’s June 8 proposal echoed many of the ideas forwarded by Bloomberg during his January 2011 State of the City Address, particularly the move to raise the retirement age to 65.

Want the latest institutional investment industry
news and insights? Sign up for CIO newsletters.

Organized labor was less receptive. Calling it an “onerous proposal [that] will pick the pockets of front-line public workers,” Civil Service Employees Association president Danny Donohue urged New Yorkers to reject the plan. “The governor’s proposal for a Tier VI pension reform for public employees is more evidence of how out of touch he is with working people and the economic pressures they face every day.”

Cuomo’s plan is decidedly less ambitious than those he had floated in the past, when he spoke of shifting workers from a defined benefit to a defined contribution system.

New York’s state pension system is unique in that it currently enjoys a funding level of 101%, according to a recently released Pew Center on the States report. New York is in a fiscal crisis, however, as pension costs continue to gobble up more and more of the budget. New York’s pension liability is almost $147 billion.



<p>To contact the <em>aiCIO</em> editor of this story: Benjamin Ruffel at <a href='mailto:bruffel@assetinternational.com'>bruffel@assetinternational.com</a></p>

Study: Institutional Investors Should Be Cautious Allocating to European Property

As institutional investors pursue the European property market, there should be a degree of caution as there is a danger of history repeating itself, says a new study by London-based Hatfield Philips International.

(June 9, 2011) — Pension funds should not embrace the European property market without some degree of caution, Hatfield Philips International (HPI) says.

The firm, which manages £35 billion worth of commercial property loans across Europe, says that in order to prevent another global property crash, regulators have aimed to limit the amount of credit available for investing. Yet, compared with financial institutions, pension funds do not face the same restrictions and capital rules.

According to HPI director Stewart Hotston: “Whilst investment from institutional investors, such as pension funds, is very good for the liquidity of the commercial real estate market, it is important that they apply a degree of caution so as not to risk history repeating itself, albeit with different actors. The capital rules, which institutional investors such as pension funds work with, are completely different and thus they can treat debt differently when compared with traditional lenders.” Hotston noted that the past five years have been a reminder of how many of the assumptions about assessing value and probability of default are “painfully wrong.”

He added: “The same words of caution should be applied to the retail property funds, whose ability to attract cash in a rising market was on occasions greater than the ability to make prudent property purchases.”

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news.

Research earlier this year showed that Germany has replaced the UK as the preferred location in Europe for investment in non-listed real estate funds.

The survey by the European Association for Investors in Non-Listed Real Estate Vehicles (INREV) discovered that compared with last year, when the UK ranked as a top property investment location, the UK fell to fourth place with Germany now the region of choice, as 36% of investors ranking German retail as their preferred intended location and sector for 2011.

“This is a dramatic change in sentiment,” Director Research and Market Information Lonneke Löwik said in a statement. “Over the last two years the UK dominated the rankings with UK retail, UK office and UK industrial/logistics included in the top four most preferred country/sector combinations. While the UK remains well represented in the top ten, investors seem wary of higher property prices and a slower economic recovery in the UK but attracted by growing confidence in the German and other European markets.”

The findings from INREV came from surveying investors and fund managers overseeing 981 billion euros ($1.3 trillion) of assets.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

«