GASB 45 pension grab up for vote on Tuesday

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.

What’s next?

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.

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Copyright 2009. All rights reserved.
Contact Steve Collins at scollins@bristolpress.com

Get the GASB 45 details Wednesday

A newly created panel may find a way to tap the city’s flush pension accounts to get some cash to cover costly health care for retired municipal workers.
If the new GASB 45 Committee, named for an accounting rule, determines that it can tap the money, taxpayers could save more than $1 million annually, officials said.
The first meeting of the new committee is slated for 5 p.m. Wednesday in the City Council chambers at City Hall.
Mayor Art Ward said he’s eager to have the issue explored thoroughly to determine if savings are possible for taxpayers.
The 13-person panel includes Comptroller Glenn Klocko, city Councilors Ken Cockayne and Cliff Block, city attorney Dale Clift and the presidents of each of the city’s unions.
Klocko said the initial session will devote an hour to explaining the issue in some depth to members and others who are interested in the subject.
He said that a PowerPoint slide show will cover the reason the city has to have a plan for tackling the costly post-employment benefits that workers receive in addition to their pensions, the legal rules governing the use of pension money and the actuarial figures involved.
“We’re going to show them the facts and figures,” Klocko said.
Klocko said once the committee has the information, its members will discuss what should be done, if anything.If a recommendation to pursue the idea is adopted, city councilors would have to give their approval, he said.
Those pushing the concept, including Cockayne, have long argued that taking some of the surplus cash in the city’s overfunded pension accounts and putting it a new trust for health care for retired workers would help everyone.
The city has a long-term plan to use tax money to fill the new health care fund, but doing it will require ever increasing funds to meet the demand and get ahead of the costs.
The city’s unions have been at best skeptical of the idea, claiming it risks losing pension money that may well be needed. They also say the city should negotiate any change with them.
Klocko said he hopes the information gathered by his office, the city’s pension lawyer and actuarial experts will aid in understanding the issue.
“We’re going to clear the misconceptions up,” he said.
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Copyright 2008. All rights reserved.
Contact Steve Collins at scollins@bristolpress.com

Cost-of-living hikes OK'd for retired city workers

Without dissent, city councilors Tuesday agreed to hand out hefty cost-of-living pension hikes to retired municipal workers.
The supposed one-time increase will give about two dozen of the most lucratively compensated retired workers $4,200 more each year.
But most of the nearly 400 eligible retired workers will get lesser hikes, though everyone who gets a Bristol pension check will receive at least another $10 a month.
City Councilor Mike Rimcoski said he went along with the proposal because he was outnumbered anyway.
Besides, he said, “This is the retirees’ money and future retirees,” too.
The deal, which will bring more money to hundreds of retired general city employees, won’t cost taxpayers anything, officials said.
The money is coming out of a trust fund that has a staggering excess thanks to wise investments over the past 30 years. It currently contains more than $500 million, at least $150 million more than it’s expected to need.
The city has no obligation to raise pensions, but councilors opted to do it for the second time ever because the cost-of-living adjustment will help so many people.
The council agreed to hand out a hike consisting of 75 percent of the annual cost-of-living increase to pension funds for each year back to 2001, the first time any pension hikes were given.
That means that workers who were retired in 2001 would get up to 16 percent more each month, though nobody can get more than $350 extra monthly.
One member of the council, Democrat Frank Nicastro, abstained on the issue. He receives a city pension for his 10-year stint as mayor and 17 years as a truant officer.
Rimcoski said a few weeks ago that he wanted to raise the minimum that every retiree would get and to scale back the maximum payment. He said that would be more fair to everyone who is struggling to get by on a pension check.
But officials said it would be costly and difficult to revise the plan that consultants worked out last fall.
The council intended to pass the increase late last year, but had to delay it after lawyers realized that a municipal ordinance needed to be changed before the inflation adjustment could be made in retirees’ checks.

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Copyright 2008. All rights reserved.
Contact Steve Collins at scollins@bristolpress.com

City or workers? Who's paid the most into retirement funds?

Here are the records through 2005, courtesy of the comptroller's office:

Click here for PDF file

The short answer is that through 2005 the city collectively put about $64 million into the general city, police and fire retirement funds while the unions put about $26 million into them.
In that time, the funds have paid out about $112 million while growing to more than $500 million in all.
The whole thing is a lesson in the value of investing money. Now if only I had some money to invest....

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Copyright 2008. All rights reserved.
Contact Steve Collins at scollins@bristolpress.com

How to save half a mill -- forever

There is a simple way to slice city property taxes by more half a mill without cutting services or laying anyone off, some officials say.
All it would take is a commitment to shift excess pension trust funds into a new account to cover the tab for post-employment health benefits, a move they say would have no impact on city workers or retirees, but would save taxpayers more than $2 million annually.
City Comptroller Glenn Klocko, who has long advocated the change, said that if city leaders decide to do it, he can immediately pare $2.5 million from the spending plan currently on the table.
That would allow a big cut in this year’s property taxes and a permanent reduction in the amount the city budgets to pay its retired workers a decade’s worth of health benefits.
City Councilor Ken Cockayne, who is also championing the move, said it “could save a great deal of tax dollars” if officials would seize the opportunity.
He said he can’t understand why he has met “nothing but a wall in dealing with this from the unions and those beholden to the unions.”
Mayor Art Ward said he’s creating a task force to look into the issue, which he said may prove more complicated than supporters expect.
City union officials have said they’re not against the change, but are looking for the city to negotiate any shifting around of money, angling to get something more for municipal workers and retirees in the process.
But it’s not clear that there’s any downside for city workers.
As it is, the pension trust funds set up to pay Bristol’s retired city workers are so flush with cash that experts say they have enough money to cover all anticipated future costs and to have as much as $200 million extra.
What Klocko is asking to do is to shift $77 million from the overfunded pension funds to fill a newly required post-employment benefits fund.
No matter what the city does, it is obligated to cover the tab for both pension payments and the post-employment benefits, mostly health care for the first 10 years after a worker retires. Those are contractually mandated and even if they were revised down the road, the existing requirement to pay would remain.
The issue is simply whether the city can move some money from one trust fund to the other, a move that Cockayne and Klocko say makes good sense because the cash will wind up benefiting workers one way or the other.
Making the change, though, means taxpayers won’t have to fork over $2.1 million to cover current post-employment benefits in the coming fiscal year – and they won’t need to shell out another $250,000 to kick start the new trust fund.
Best of all, from a city finance point of view, there will never again be a need to include the money in its annual budget because the trust funds should continue growing enough to allow investments to cover rising expenses in the decades to come.
The half a mill property tax cut that the change would produce, Klocko said, would go on forever.
Klocko has another plan to save that half mill for just this year: to put off purchasing any new police cruisers, delay park and fire equipment purchases, slice $500,000 from education, snatch excess cash from the ropes course fund, pare the economic development cash and more.
The trouble with that course, which may be what’s needed to cut the mill rate hike to 4 percent instead of 6.5 percent, is that nearly all of the money Klocko is eyeing will have to be paid next year, or soon after.
Taxpayers may get a little break for a year – and some cost to the schools and to city services – but there’s no real long-term benefit.
What the proposal to shift around excess trust fund money offers, however, is permanent relief, its advocates say.
And failing to seize the moment would be a mistake, Cockayne said.

For more on the post-employment benefits issue, read this story

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Copyright 2008. All rights reserved.
Contact Steve Collins at scollins@bristolpress.com

City retirees likely to get more pension money soon

City councilors are poised to offer a hefty cost-of-living hike to retired municipal workers.
Though the city has no obligation to raise pensions, the City Council this week unanimously agreed to adopt a one-time increase this year.
Councilors did not say how much the hike might be or how much more it will cost.
To push through the cost-of-living adjustment, which was first talked about last fall, the council had to adopt an ordinance allowing the move. Councilors did that this week.
It appears the council will soon give a green light to the pension hike that they considered in December, which would provide some retired workers as much as $4,200 more each year.
There are nearly 400 retired workers covered by the general city retirement plan, which is the one the council is eyeing to tap to pay for higher pensions.
Because the trust fund that covers the retirees’ pensions has a whopping excess of money, experts have said the inflation adjustments won’t crimp taxpayers and won’t jeopardize the city’s ability to make pension payments in the future.
It would, however, make it a little harder to snatch tens of millions out of the pension account to fill a new health benefits fund that someday will cover the health care costs of future city retirees. That fund needs more than $75 million.
The general retirement fund has more than $500 million, which is far more than actuarial professionals estimate it will need. The fund has grown so large since its inception in 1978 that taxpayers no longer have to make any annual payments to keep it up.
There are more than 30 city retirees who receive pensions of more than $50,000 annually and at least one who collects twice that.
The cost-of-living adjustments are likely to cover the last five years or so, with more recent retirees getting less than the full amount.
The proposal that councilors considered adopting a few months ago would add 75 percent of the annual cost-of-living increase to pension funds for each year back to 2002, the first time any pension hikes were given.That means that workers who were retired in 2002 could get up to 16 percent more each month if the council endorses the idea. More recent retirees would get less.City Treasurer Bill Veits said that workers who retired in 2005, for example, will get 5.58 percent more, or two years’ worth of cost-of-living adjustments.About two dozen retirees would get the $350 maximum monthly increase while five would get the minimum of an additional $10 a month.
The city offered a cost-of-living hike to its retirees once before, in 2002, without going through the trouble of authorizing the move with a specific ordinance.
One member of the council, Democrat Frank Nicastro, abstained on the issue. He receives a city pension for his 10-year stint as mayor and 17 years as a truant officer.

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Copyright 2008. All rights reserved.
Contact Steve Collins at scollins@bristolpress.com

Tap excess pension fund cash, councilor says

The city should push forward quickly with plans to move excess pension fund money into a newly mandated trust account to pay for retirees’ health benefits, says freshman city Councilor Ken Cockayne.
“This fund is a huge issue,” Cockayne said, and crucially important if officials want to keep property taxes from rising in the years ahead.
“I’m worried about the taxpayers. That’s the bottom line,” he said.
Bristol needs to sock away at least $77 million during the next couple of decades to cover the health care costs that city workers are set to receive after they retire from government service. So far, it has a bit more than $1 million in the trust fund.
City Comptroller Glenn Klocko and members of the Board of Finance have already indicated they would like to pursue the possibility of dipping into pension trust funds that are flush with cash in order to pump some more money into the post-retirement benefits trust fund that new accounting standards mandate.
Cockayne said that city unions are fighting the idea even though the new fund will benefit the same people the pension funds do.
From Cockayne’s point of view, “union money is still being used for the union purposes” since the same people benefit either way.
Union officials have said they’re not necessarily opposed to the idea, but argue it has to be negotiated. They’d like to receive something in return for easing the burden on city finances.
Cockayne, a Republican who was elected in November, said that the unions are basically saying the city should have excessively funded trust funds for future pension payments while socking taxpayers to create a new fund.
“Why does the union have to always get something for doing something that’s right, for the taxpayers and city that is paying their pay?” Cockayne said.
He said he’s going to push hard on the issue despite the difficulty of opposing city unions.
“It might be an uphill battle since a few of the council members are union members,” Cockayne said.
The city’s pension funds have racked up more than $500 million – about twice what they need to pay out – by investing wisely in stocks, bonds, real estate and more since starting the funds back in 1978.
If the pension funds can also pay off the health care benefits, that’s a double savings for taxpayers that few if any communities in the country have the capacity to pull off.

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Copyright 2008. All rights reserved.
Contact Steve Collins at scollins@bristolpress.com

COLAs for city retirees delayed

City councilors did not approve the cost-of-living hikes sought for nearly 400 municipal retirees tonight.
City attorney Edward Krawiecki, Jr. said that a legal hitch arose this afternoon when lawyers spoke with an outside expert about the move.
Krawiecki said the city needs to revise its ordinances to allow the increase.
It doesn't appear the council has a problem with the request, but nothing is likely to happen until the ordinance panel takes up the matter.

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Copyright 2007. All rights reserved.
Contact Steve Collins at scollins@bristolpress.com