A former state treasurer and investment expert is calling on Democratic New York City Mayor Bill de Blasio to stop politicizing pension funds with fossil fuel divestment and do what’s objectively best for retirees.
De Blasio joins the growing chorus of environmentalists who are demanding a withdrawal of fossil fuel investments, believing such an effort will help fight climate change. De Blasio and New York City Comptroller Scott Stringer announced in January that they are looking into divestment options for the city’s pension funds.
“New York City is standing up for future generations by becoming the first major U.S. city to divest our pension funds from fossil fuels,” de Blasio said at the time. The progressive mayor coincided this announcement with a declaration to sue fossil fuel companies, accusing them of contributing to climate change.
Fossil fuel divestment would be a big task for the NYC government. The New York City Retirement Systems has a total of $189 billion in assets. The city’s five different pension funds — each with their own board of trustees — has around $5 billion in fossil fuel investments in over 190 different companies. Not all boards support de Blasio’s proposal. The New York City Police Pension Fund and the New York City Fire Pension Fund both oppose divesting from fossil-fuel investments.
While the idea of divestment is popular with environmentalists and other progressive stalwarts, opponents are pointing out that de Blasio’s proposal is not in the best interest of the city’s retirees who depend on the financial security of their pensions. Christopher Burnham, a former Connecticut state treasurer, argued that de Blasio is putting politics ahead of retirees.
“A secure retirement built on a strong pension has always been the ultimate reward and ‘thank you’ for a lifetime of service by our public servants. Unfortunately, massive unfunded liabilities in pension systems across the country threaten that security,” wrote Burnhan in an op-ed for New York Daily News. “Now, if we let them, Mayor de Blasio and City Controller Scott Stringer will inject a whole new level of politics into the management of New York City’s public pension funds by making arbitrary and political decisions regarding what the funds should or should not invest in.” (RELATED: The Mayor Of New York City Doesn’t Know How Many Undocumented Children Are Being Sent There)
Beyond his stint as an elected state treasurer, Burhman’s financial management credentials run deep. He served as vice chairman of Deutsche Bank Asset Management and is currently chairman of Cambridge Global Advisors. Burnham founded the Institute for Pension Fund Integrity, a non-profit group that fights for fiduciary responsibility in public pension funds. The Institute has examined NYC’s example closely.
Burnham points out, that while pension funds should be managed objectively regardless of the situation, New York City’s case is already at grave financial standing.
Under optimistic projections, New York City faces $60 billion in unfunded pension liabilities. If the rate of return for pension funds are reduced even slightly, these unfunded liabilities have the potential to surpass $90 billion, which would require an increase in city contributions. To put this situation in perspective, NYC devotes 10 percent of its annual budget to pension costs — over seven times the average total budget of the 100 largest cities in the U.S.
New York City could lose $25 million in immediate frictional costs and around $1.5 billion over the next fifty years if de Blasio’s call for fossil fuel divestment is successful, according to Burnham’s findings, compounding an already dire situation.
“Following the misguided path of other divestment movements, de Blasio and Stringer have shown pensioners that they are not concerned with the health of their retirement — only their approval ratings, and perhaps the results of the next election,” Burnham said.
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