March isn’t half over yet — but we already have a winner!  Even with the state budget unsettled (with all that implies, bad ideas-wise), the worst idea of the month is surely a proposal by state Sen. Carl Kruger for avoiding East River bridge tolls by arbitraging a bond issue through the state pension fund.

Kruger’s immediate motivation is the Senate Majority’s need to come up with an alternative to the Ravitch Commission’s proposal to raise cash for the Metropolitan Transportation Authority (MTA) by (among other things) imposing tolls on the currently toll-free East River bridges, which outer-borough lawmakers strongly oppose.

And so, from the Senator’s news release today (unposted but passed along by a Capitol source), a plan he says “won’t cost taxpayers a cent”:

Under [the] proposal, legislation would be enacted to create an asset management group — a public benefit trust which would then own the free bridges. This new state agency would borrow $4.25 billion through the issuing of a 30-year bond, give about $1 billion of that sum to the MTA and invest the remaining $3.25 billion with the state’s common retirement system.

“Over 30 years the retirement system has boasted a minimum return of more than 6 percent – and an average return of over 10 percent during the pension system’s 79-year history,” said Sen. Kruger.

“That historical rate of return would allow the bond to be paid off in its entirety and cost the taxpayers nothing,” he said. “The MTA would reap $1 billion from the deal and the rest of us would avoid the grim prospect of tolls, which are nothing more than a back-door approach to congestion pricing offered by the Manhattan elite.”

Reality check

To pay debt service on $4.25 billion in bonds issued at, say, 5.25 percent, a back-of-the-envelope estimate suggests a $3.25 billion “investment” in the pension fund would need to return 8.7 percent a year.  But Sen. Kruger seems unaware that the retirement fund’s “historical rate of return” is … history.

During the fiscal year ending June 30, 2008, the pension fund gained just 2.6 percent–well short of its 8 percent target rate.  As of Dec. 31, the fund had lost 21 percent of its value, according to state Comptroller Thomas DiNapoli.  Since then, needless to say, its asset values have plummeted further.  At the rate things are going, the fund will be lucky to hold its losses to 30 percent in the current year.  And the recovery outlook isn’t great: Wall Street economist Henry Kaufman is not alone in predicting returns of just 4 to 5 percent over the next five years.  In that case, tax-funded employer contributions to the pension fund will be skyrocketing.

If the fund’s returns fall short of Kruger’s expectations, his bridge bonds could only be serviced by siphoning more cash from the same shrinking pension pool–which, come to think of it, means this idea probably violates the anti-impairment clause (Article V, Section 7) of the New York State Constitution.

As an alternative, the bonds could be secured by the bridges themselves, but the bridges theoretically have value only because they could be tolled.  More likely, the bonds would ultimately be backstopped in the usual Albany fashion: by a pledge of state personal income tax revenues.  Which are also plummeting.

By the way, Sen. Kruger (D-Brooklyn) isn’t just another back-bencher.  He also is chairman of the state Senate Finance Committee, which makes him the new Senate majority’s key player on money issues.

Meanwhile, if it’s solid returns the senator wants, there’s an obvious better choice.

And, in another sign of the Senate Democrats’ desperation to come up with another plan for funding the MTA, the Transportation Committee chair is floating a gas tax.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

You may also like

New York’s Hospital Industry Ranks Near the Bottom of Two Quality Report Cards

New York's hospitals remain near the bottom of two quality report cards. The state's hospitals received the lowest rate of any state except Nevada and DC. Read More

Lawmakers Mull Medicaid Proposals That Would Speed New York Toward a Fiscal Cliff

As a budget deal nears in Albany, reining in spiraling Medicaid costs seems to be the last thing on anyone's mind. Governor Cuomo is advancing only Read More

MTA: Overtime down, take our word for it

Every year for over a decade, the Empire Center has submitted Freedom of Information Law (FOIL) requests to the Metropolitan Transportation Authority for the payrolls of MTA corporate subsidiaries. And in almost every one o Read More

As a Supreme Court Ruling Loomed, Cuomo Bent His Own Rules on COVID ‘Clusters’

In the midst of the constitutional showdown over his pandemic policies, Governor Cuomo made changes to a disputed Brooklyn 'cluster zone' that seemed to contradict his own declared guidelines. Read More

A Federal Emergency Rule Is Inflating New York’s Medicaid Enrollment

Strings attached to federal coronavirus relief funding appear to be inflating New York's Medicaid enrollment – and costs – at a time when the state faces unprecedented deficits. Read More

New York Medicaid Spending Is Projected to Jump 6% in Fiscal Year 2021 (UPDATED)

Despite a round of cost-cutting this spring, New York's Medicaid spending is on track to jump by 6 percent this year thanks to a massive influx of federal aid. Read More

New York’s Post-Pandemic State Budget Picture Is Looking Worse

Governor Cuomo continues to burn while pols in Washington fiddle around the issue of providing more aid to states and localities in yet another federal stimulus bill. Meanwhile, New York State's plummeting revenues still haven't hit their post-pandemic bottom, according to the First Quarterly Update to the state's FY 2021 Financial Plan. Read More

New York Has Widened Its Lead in Per-Capita Spending on Medicaid

New York's per-capita Medicaid spending soared to more than double the nationwide rate in 2018, widening its gap with the other 49 states. Read More


Sign up to receive updates about Empire Center research, news and events in your email.


Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100

General Inquiries:

Press Inquiries:


The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

Empire Center Logo Enjoying our work? Sign up for email alerts on our latest news and research.
Together, we can make New York a better place to live and work!