A proposal to snatch excess pension money and use it to fund the health care of retired city workers is heading for a key vote Tuesday.
The GASB 45 Committee that’s reviewing the plan that could save taxpayers as much as $2 million annually intends to make a recommendation Tuesday to city councilors who have the last word on whether to take the controversial step.
Though most insiders expect the committee to recommend the city do nothing, supporters are pushing the idea as one of the few ways the city could reduce its expenses or increase revenue without hurting taxpayers.
Ronald Mulvihill, a benefits specialist for the American Federation of State, County and Municipal Workers who based in Washington, said the move wouldn’t be as simple as its backers said.
“You have many hoops to jump through,” Mulvihill told the committee.
He said the law is complicated and that unless the city works out an agreement with the relevant unions ahead of time, the issue is sure to land in court.
Mulvihill said he has no idea who would prevail in a court battle because the provisions of the statutes governing the issue are so unclear.
But, he said, the city comptroller’s office “had it right” when it laid out the issue for the panel’s consideration. [Here is the comptroller's presentation.]
Federal law allows the city to shift money within its pension trust fund into a new account for retiree health benefits as long as the pensions remain at least 120 percent overfunded. If it falls below that, the city would have to move the money back into the pension fund, officials said.
It would remain under the control of pension fund trustees so the change, if it’s ever made, would likely not change the way the funds are invested.
The city has about $400 million in its three pension funds – for general city employees, firefighters and police officers – and about $100 million above what actuaries say it will need. But only the police and fire funds are currently flush enough to consider tapping.
Bristol Police Local 754 issued a statement last week that offered to work with the city “to get through these tough times” in the economy, but opposing “draining pension funds.”
“While it is true the city needs to address the GASB 45 reporting requirements, it is not true that this must be done immediately and it is obvious to us that taking radical measures in a turbulent economic climate is short sighted and dangerous,” the statement said.
Other city unions are skeptical as well.
Generally, the unions worry that in snatching excess cash to pay for health care benefits, the city could put its pension fund in jeopardy and perhaps set up a scenario down the road where it might renege somehow on the contractual payouts it is on the hook for.
But Republican mayoral candidate Ken Johnson said that officials have to focus on this issue because it offers a chance to secure “millions and millions in tax savings staring us in the eye.”
Mulvihill said the city should be happy that is has made “fantastic investments” over the years and put its pension fund into an elite handful of municipalities in the whole country that could even consider using surplus money for something other than paying pensions.
Even so, he said, tapping into the cash would be akin to taking out a reverse mortgage. He said it would ultimately catch up with taxpayers.
The GASB 45 Committee is named after an obscure accounting standard that requires cities and towns to figure out their future post-retirement obligations to employees and provide some inkling of how they intend to pay the money when the time comes.
Bristol needs about $72 million to cover its future post-retirement obligations to employees, not counting pensions. It currently pays out about $3.6 million for the health care of retirees, who receive municipal health care for a decade after they retire.
The GASB 45 Committee meets at 5 p.m., Tuesday at City Hall. City councilors may act on its recommendation as soon as Tuesday, March 10.
Contact Steve Collins at email@example.com