Pension expenses have risen over the past decade and this rise in pension is expense is as a result of numerous factors. According to the detailed report by John C. Liu, the two main contributing factors to the disproportionate increase in New York City’s pension costs are lower investment returns and benefits enhancement put in 2000. Mayor Bloomberg believes that the primary reason for the increase is the benefits enhancement. This partially ties in with Liu’s findings from his research, as Liu believes it’s one of the two primary reasons for the increase. Mayor Giuliani, the New York City mayor from 1994 to 2001, increased pension benefits in the 90s because the city was benefiting from the bull market. This resulted in an increase in pension fund investment profits and thus the Giuliani increased pension benefits. The increase in investment returns reduced the pension expenses incurred by businesses thus making them feel as though the markets will soar forever. Companies got comfortable with the bull market since they were incurring less pension cost. However, they had little knowledge that they were setting themselves up for failure since the rate will balance out in the long run. This failure was triggered over the past decade when the bear market hit thus resulting in a major decrease in investment returns. This significantly increased the pension expense due to the gap between benefit obligation and plan assets that resulted from continuous decline in actual return on plant assets. New York City and businesses are still under constraint from this failure.

Mayor Giuliani’s benefits enhancements that were implemented during his term added an additional 40% in New York City’s pension expense. The mayor implemented theses benefits to appease the city and in order to get reelected into office. Giuliani took advantage of the bull market to look good by