When a public pension fund underperforms its benchmarks, the state is legally required to make up the shortfall. Candidate Drew Warshaw argues this funding comes directly from taxpayers through higher property and state income taxes, effectively creating a hidden tax to subsidize poor investment management.
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The NY Pension Fund pays hundreds of different managers to actively invest. Candidate Drew Warshaw argues this level of diversification is self-defeating, as it effectively recreates the market index but with massive fees and a worse tracking error, resulting in significant underperformance compared to simple, low-cost index funds.
Once a 'one-time' wealth tax is implemented to cover deficits, it removes pressure on politicians to manage finances responsibly. The tax becomes a recurring tool, and the definition of 'wealthy' inevitably expands as the original tax base leaves the jurisdiction.
While politicians can ignore massive fraud to maintain patronage systems, the financial markets will not. As the scale of waste in states like Minnesota and California becomes clear, bond investors will reprice the risk of municipal bonds, potentially triggering a fiscal crisis that forces accountability where political will has failed.
Deficit spending acts as a hidden tax via inflation. This tax disproportionately harms those without assets while benefiting the small percentage of the population owning assets like stocks and real estate. Therefore, supporting deficit spending is an active choice to make the rich richer and the poor poorer.
Runaway costs in education, housing, and healthcare stem from government intervention. When the government promises to provide a service (e.g., student loans), it becomes a massive "buy-only" force with no price sensitivity, eliminating natural market forces and causing costs to balloon.
The New York State Unclaimed Fund holds $20 billion of citizens' money—a figure that has nearly tripled in 18 years. Candidate Drew Warshaw frames this growth not as a large asset, but as a key performance indicator of the comptroller's failure to proactively return money to its rightful owners.
Drew Warshaw frames the "Not In My Backyard" (NIMBY) phenomenon as a rational, if selfish, economic decision. Incumbent homeowners are incentivized to restrict new housing supply because basic economics suggest that increasing supply could decrease the value of their primary asset: their home.
Unlike private enterprises, government-run entities are inherently inefficient. They lack the two fundamental drivers of improvement: market-based price signals and direct competition, which remove any incentive to innovate or improve.
A convergence of factors threatens the financial stability of state governments. Increased scrutiny of waste, fraud, and abuse, combined with the future exposure of massive unrealized pension liabilities, could lead to a crisis of confidence and severely restrict their ability to borrow in capital markets.
Unlike most large funds, NY's pension is managed by one person without a board. While a board seems like an obvious solution, candidate Drew Warshaw cautions that politically appointed boards can diffuse accountability rather than improve it, creating a different set of governance problems.