Better in their words…

What does it take for some people to learn a lesson?
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Andrew Cuomo has a bridge to sell you, and we wish that was the set-up to a punch line. The New York Governor and government unions are hatching a plan to use the state’s pension funds to bankroll public works like replacing the Tappan Zee Bridge.

In a radio interview with Talk 1300 AM in Albany over Thanksgiving weekend, Mr. Cuomo explained that “the state doesn’t have enough money . . . either with cash, or its balance sheet” to fund the much-needed replacement of the rickety three-mile bridge across the Hudson River, at a cost he estimated at $5 billion to $6 billion. But no worries: “There are a number of possibilities for financing . . . there are state pension funds, there are city pension funds, there are labor pension funds, there are private sector equity funds and debt funds.” [Say what?!!!]

With the budget under pressure because of the state’s unsustainable Medicaid and social-welfare spending, Mr. Cuomo is looking for another pot of cash to pay for such basic government obligations as roads. But pensions have a fiduciary duty to get the best returns to finance retirements, and if they fail then taxpayers have to pick up the tab.

As an “investment opportunity,” the Tappan Zee isn’t Google. The potential for toll hikes is always hostage to politics, and the bridge itself is an illiquid asset that must be held for the long term, while the state’s biggest challenge is to pay for benefits over the next decade.

Public unions nonetheless love Mr. Cuomo’s plan, which would give them political leverage and reinforce the impression that the money is theirs to bargain with. Less pretty is the picture for taxpayers in New York, where pension funds have on average earned a little over half their expected rate of return in the past decade, according to the Empire Center for New York State Policy. New York City now spends about $8.4 billion a year to rescue its pension funds, up from $1.4 billion in 2002, when Mayor Michael Bloomberg took office.

The state could fund the bridge by issuing new debt or inviting in private investors as Mayor Richard Daley did for Chicago’s Skyway. But perhaps Mr. Cuomo’s plan was inspired by his father, former Governor Mario Cuomo, who in 1991 sold the state’s Attica Prison to its own Urban Development Corporation for $200 million. This allowed the Governor to paper over a budget shortfall, an accounting trick that would make Enron blush.

Today’s Horatio at the tollbooth is elected state Comptroller Thomas DiNapoli, who is both the sole trustee of the $146.9 billion pension fund and the state’s top fiscal officer. According to the National Institute on Money in State Politics, Mr. DiNapoli’s 2010 campaign received more than $400,000 in union contributions and he will be under heavy pressure to go along with the Governor’s gimmickry.

Mr. DiNapoli must consider the health of the pension fund and what is in the best interest of the state’s finances, and he can show his political independence by declining Mr. Cuomo’s offer. In 1978, New York City Mayor Ed Koch and New York Governor Hugh Carey tried to bully a previous comptroller, Arthur Levitt Sr., during the New York City financial crisis. “If New York City fails, it will be your fault,” Mr. Koch told Levitt, who refused the, er, request to use the state retirement funds to avoid bankruptcy.

Mr. Cuomo is selling his plan as an innovative public-private partnership, but it is really an exercise in crude politics, letting him empower unions to finance a project voters want while saying he didn’t raise the state’s debt to do it. Pension cash has been the holy grail of politicians for decades, and once they start tapping it, look out below.

Review & Outlook: The Union Zee Bridge – WSJ.com.