Submitted by George N. Spitz, Nov 6, 2006 19:08

Christopher Callaghan's well thought out plan for placing new New York state employees in a 401(k) plan has some merit. It certainly is not fair to call it, as Hevesi supporters do, "privatization." Placing $1,000 in a bond bearing 5% interest would mean the 401(k) account in 30 years due to compound interest would have $6,000.. However, the main issue should be the cost to taxpayers and public services of Hevesi's management of the $142.6 billion pension fund.. Payments made to the fund each year by New York state and local governments have mushrooms. New York State and local governments contributed $2.7 billion to the pension fund in the year ending March 31, 2006. This is more than 10 times the $263 million contributed in 2002 the year before Hevesi took office. This increased expense has had deleterious effect on the state budget and a drain on local governments forcing them to increase property taxes.

If the fund's assets, as Hevesi now claims total $142.6 billion, it should be relatively easy to pay the $6.1 billion for retiree pensions without further contributions from hard-pressed state and local governments and their employees All Hevesi would have to do is invest in securities bearing interest rates of around 4.28%. Interest rate for the most recent New York State taxable bonds were 5.1% and for tax exempt bonds 4.1%.

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