Wednesday, January 27, 2010

City Should Honor Original Council Pledges

Provide Additional Funding Contribution to the Pension Plan from a Different Source if Legal Opinion Demands it

The "Springfield News-Leader" reported January 27, City Manager Greg Burris is suggesting part of the A T & T telecom settlement money be used to pay a 2.77 percentage point difference to the Tier I police and fire pension plan to take responsibility for decreased employee contributions to the Tier I plan, a result of the plan being shut down to new hires in 2006.

According to the report, the pension board agreed to pay an "Additional Funding Contribution" to support a benefit "enhancement" in 2000. The enhancement allows Tier I police and firefighters to accrue maximum benefits at an accelerated rate, the report stated.

The issue might be considered to be raised fairly since, in 2000, the pension board would have no way of knowing Tier I would be closed in 2006, reducing the additional employee funding contribution to the plan.

I can understand, on one hand, why Burris would feel the City has some responsibility to contribute to the percentage point shortfall under the outlined circumstances but, by offering as one option, A T & T settlement funds as the means of covering the 2.77 percent, when the City Council has already pledged to put the entire settlement amount (and any other telecom settlement proceeds) into the pension plan anyway, could be considered to cut contributions by 2.77 percent, rather than take responsibility for them.

If the City wants to take responsibility for 2.77 percent on behalf of Tier 1-covered employees, then the difference should be paid through a funding source not already pledged to benefit the fund. Using funds already earmarked for the pension plan in the first place could be perceived as just a shell game, rather than a real contribution. One hand takes away, the other hand puts it back, and the 2.77 percent the employees would have contributed is lost in the shuffle, it would simply go away.

Of course, that's just my opinion, which is what the News-Leader reported about Burris' thoughts, that it's just his opinion the City should take responsibility for paying a portion of the additional funding contribution.

The paper reported Burris wants to wait and allow the Citizens' Sales Tax Oversight Committee to offer an opinion before the City Council makes a final decision about it.

The City began soliciting applicants for the Tax Oversight Committee on January 26, 2010. The deadline for turning in applications is 5 p.m., Feb. 9.

But, getting back to the original topic, in another way, it doesn't seem a fair question whether the City should be responsible for a portion of Tier I's "Additional Funding Contribution." While Tier I might not have known in 2000 that in 2006 Tier II would be created and Tier I would be closed, the time for this question would have been better suited to have been raised in 2006, or at least in 2009, when City Council stated at line 182 of resolution #9714 (passed on September 10, 2009 at a public meeting),

"If the tax passes ... The Additional Funding Contribution (AFC) portion of their (police and fire Tier I employees) contribution, as determined by the actuary's experience study, will continue in perpetuity; the additional contribution will sunset when the tax sunsets."

If the City chooses to label a portion of the A T & T settlement money as satisfying 2.77 percent of the additional funding contribution, it will take that much longer for the 3/4-cent pension sales tax to satisfy the pension shortfall and could potentially increase the number of requested extensions of that sales tax.

The News-Leader's Editorial Board also opined, in the January 27, "Our Voice" column, residents should be keeping an eye on the pension issue and that the News-Leader will try to seek answers as to why the City Manager would recommend the Council contribute millions more into the Tier 1 plan, money police and firefighters had already agreed to pay themselves.

One scenario (I'm just supposing) might be that Burris thinks there is a possiblity that if there is a legal challenge brought by the police and fire association/union attorney concerning this additional funding contribution, a judge might rule against the City, ruling the City should contribute the difference. In that case, Burris might want to play it safe and label part of the A T & T settlement money as payment of the 2.77 percent to protect himself and City staff from having to come up with an additional $5 + million in the future.

Certainly, the City manager could be considered crazy for recommending the Council pay a contribution police and fire employees have already agreed to pay but, is he? If he really thought the City could lose in a law suit against them, he might just be (in a self-serving way) "crazy like a fox" because, by recommending, as an option, mind you, part of the A T & T telecom settlement money be labeled as payment of the additional funding contribution, he and other City staff members wouldn't be scrambling to come up with the contribution through potential budget cuts later.

Think about it. The contribution(s), if payment is required from the City rather than Tier I employees, are going to come out of the tax payer's pocket regardless of when and how. Burris could be thinking, 'So, why not make it less painful for me and the City staff responsible for balancing a budget every year?' With a simple slight of hand it could appear $5 + million has been compensated in the fund. The reality is, if it is done using A T & T settlement funds, and the City manager gives up before there is even a legal challenge filed, it is crazy but, it would make his job easier. We need to know, for certain, the motivation for such a recommendation because, the difference is, by using that option, the responsibility is transferred from the collective shoulders of those police and fire employees who benefit from Tier I, and to the shoulders of the tax payer .

Regarding the potential legal question, in my opinion, since there was no objection to the additional funding contribution in 2006, when Tier II was created and Tier I was closed, then that ship should be considered as having sailed but, if there is still a question? There was even a very recent, second chance for police and fire Tier I beneficiaries to object to paying the additional funding contribution. The chance even occurred at a time the pension board, and many police and fire department employees, were fully focused on the pension plan and a highly touted sales tax remedy to its shortfall. You see, in 2009, when Tier I beneficiaries' responsibility to pay the additional funding contribution was reinforced by the passage of Council resolution #9714 in a very public meeting, Tier I employees, again, failed to object to taking responsibility for that contribution.

We really do have to wonder why Burris is offering an opinion that appears to concede this challenge before a challenge has even officially been filed (if it ever gets filed) a position the News-Leader reported was even in opposition to his own legal councel's opinion....

Experience might have been useful? (I'm just askin'...)

Where IS Vincent David Jericho when a girl needs him!? ;)


1 comment:

tom said...

I'm quite certain @ some point the taxpayer might get tired of the programs which allows the failures of the police/fire and the pension administrator to go unscathed.