New York City’s budget has been balanced, boasted Mayor Zohran Mamdani. The city was expecting a $12 billion budget deficit, but Mamdani was able to close it, he claims, without giving up on plans to deliver universal childcare and city-owned grocery stores, and without putting it “on the backs of working people.”
How did this budget miracle come to be?
The Mamdani administration credited the result to cost-saving initiatives and state aid from the governor and lawmakers in Albany. But one of the largest “savings” items is not a saving at all. It is a delay in paying the city’s public pension debt.
The city’s budget documents credit $1.64 billion in savings to “restructuring unfunded pension liability.” What this clinical phrase means is that the city plans to cut crucial contributions to pay down its $27 billion in pension debt, which is the amount New York City is short of what is needed to pay for the pensions already promised to its workers and retirees.
Before Mamdani’s plan, the city’s pension debt was on track to be paid by 2032, with contributions to cover the unfunded liability expected to grow until then. But Mayor Mamdani’s plan extends this amortization period by five years, to fiscal year 2037. The administration justified the change by saying that the new amortization schedule is intended to avoid a “cliff” in 2032, when amortization costs abruptly end. But the cliff is merely the scheduled end of a debt-payment plan.
Mamdani’s maneuver is nothing but a budget gimmick. This plan will reduce immediate pension debt payments and lead to higher payments in the future, which will be needed not only to make up for smaller contributions in the years to come but also to cover the interest, the investment earnings the money would have earned if it had been added to the fund years earlier.
Despite this, the mayor claims that his plan will place the city’s pension fund on a more stable foundation by establishing fixed pension debt payments, a practice actuaries call “level dollar,” rather than the variable payments currently used. Level dollar is often considered a more fiscally conservative approach because it establishes clear, predictable payments that do not push the largest payments to the end of a payment schedule, when they may well become another administration’s problem.
But a level-dollar payment structure can still be problematic if policymakers use it to extend an amortization timeline or to reduce near-term pension contributions, which is precisely what Mamdani is doing.
The Mamdani administration has not released a full actuarial schedule showing what taxpayers will pay over the life of his budget plan. Modeling conducted by New York City’s comptroller’s office, which was based on an earlier proposal that would have extended the amortization period even longer, to 2044, estimated that such a change would have added $6.5 billion in overall costs for taxpayers. Mamdani’s proposal, despite being shorter and less radical, will likely add billions to taxpayers’ overall burden over time.
The administration’s own budget slides include a reassurance to city workers: “This restructuring has no impact on retirees and their benefits or current employees and their future benefits.”
This is correct, and precisely why this delay is so detrimental to the city.
A city or state pension fund is more like a savings account for the city than a pot of money for retirees. Their pension benefits are legally independent of the amount in the pension fund. New York City cannot reduce the pension benefits already promised to existing workers and retirees. If the city sets aside too little money for its employees’ retirement, taxpayers will still be on the hook for the difference. Given the massive scale of public pension liabilities, neglecting funding at any level can have massive implications.
According to the Reason Foundation’s research, New York City already has roughly $260 billion in long-term liabilities, which represents nearly $30,000 in debt per resident. More than half of this debt is from unfunded public employee benefits. In absolute terms, New York is the most indebted city in the country. On a debt per capita basis, it ranks fourth.
Other cities have paid the cost for extending their pension amortization in the way Mamdani is doing. This was one of the first things Chicago tinkered with during its budget shortfalls. After years of underfunding its public pensions, Chicago repeatedly pushed out its pension repayment timeline. For its police and firefighter pension funds, for example, the target date for reaching 90% funding has been extended to 2060.
This strategy doesn’t reduce costs, it delays them in the short term and increases them in the long term, saddling future generations with the debt while politicians spend today. This is also how public pension plans find themselves in the same funding hole they’ve been in for decades, perpetually 10 to 20 years away from paying off prohibitively expensive debt.
If Mayor Mamdani wants to spend more money, he should make that case openly and identify sustainable revenue sources to support his spending priorities rather than stretching out current bills and passing the costs on to future taxpayers.
Underfunding public pensions is an ill-conceived budget play focused solely on short-term spending, and Mayor Mamdani may continually try to push these costs onto future generations and mayors. “On the backs of working people,” as the mayor put it, is exactly where the costs of poor city planning like this tend to land eventually.