Finance Committee OKs pension closures, budget revisions
Council to take up issues Oct. 24
But that’s just the start of addressing the pension liabilities, Councilman John Reed said.
“A statesman … thinks about the next generation. A politician is somebody that thinks about the next election,” said Reed, the chairman of the Finance Committee. “And this is serious enough that we need to act as statesmen.”
Reed pointed to a chart he’d made that showed the city is budgeted for $20 million in general fund tax revenue (not including the user fee and similar funds) this year and has allocated $4.5 million to pay toward the police and fire pensions. That’s 23 percent of the general tax revenue, he said.
But under the current payment structure, the city must contribute 107 percent of the previous fiscal year’s payment to the pensions until the unfunded liabilities are paid.
At that rate, the payments would continue increasing until personnel costs consume the vast majority of the municipal budget, administration officials have said.
By closing the funds to new hires, the city would preserve benefits for current employees, retirees and beneficiaries and stop the unfunded liabilities from rising. New employees would become part of a statewide plan with benefits somewhat below the current levels but at a lower cost to employees and the city.
The city can then move to a new payment plan for the existing funds that Finance Director Eric Jiles has said is based on sound actuarial principles. But that also means increasing the annual pension contributions — starting in the current fiscal year — by more than $2 million.
Initially, it was projected to be a $2.5 million increase, which Reed noted would mean the pensions take up 35 percent of the general fund tax revenue. The latest actuarial projections lowered the payment for this year to $2,282,726, which Mayor Tom Joyce proposed funding with a combination of money carried over from the previous fiscal year ($1,068,204), the entire stabilization fund ($957,559) and a portion of the capital reserve fund ($245,963).
The payments are projected to eventually decrease, rather than continue to grow like under the current system.
Members of the committee voted 3-0 to close the police pension to new hires, with Councilwoman Sharon Kuhl abstaining and leaving the room during the discussion and vote because her husband, Wood County Magistrate Joe Kuhl, is retired from the Parkersburg Police Department. Kuhl returned and joined in a 4-0 vote to close the fire pension fund to new hires.
The committee then voted 4-0, with Councilman Bob Mercer absent, to approve the budget revisions proposed by the administration to cover this year’s pension payments.
No committee members or other council members present spoke against the proposal.
Joyce has said he could not in good conscience hire police and firefighters while the plans remained open because each new hire would add an additional $1.2 million to $1.5 million to the unfunded liability.
“If this committee forwards on this and council passes it, this would release that hiring freeze?” Reed asked.
Joyce said that would address his concern about adding to the liability. After the meeting, he said there isn’t an official hiring freeze but he could not say the four vacancies in the police department and two in the fire department would be immediately filled, since the city is trying to determine how to come up with the additional pension payments going forward.
Reed assigned members of the Finance Committee to subcommittees to study ways to cut costs and free up money for the payments. Mercer and Councilman Mike Reynolds were asked to meet with department heads to look at “rational ideas in reducing personnel workforce,” while Kuhl and Councilman Zach Stanley were tasked with looking “at non-personnel-related cuts.”
He also asked Finance Director Eric Jiles to look at other avenues for generating revenue.
“I think we’re going to be … hitting some (increased) revenue items, and that’ll be next, but to accompany that, I think we all need to look at, is there an honest way to make some strong, necessary adjustments in expenditures?” Reed said.
The committee previously expressed support for a 1 percent sales tax dedicated to paying toward the pensions, but City Attorney Joe Santer said further research showed the city was not eligible to utilize that method.
Reed asked committee members to discuss their progress at a Finance Committee meeting on Thursday, Nov. 16, though he agreed with Council President J.R. Carpenter that any action by council would probably need to wait until the budget process next year.
“It may very well be a budget process … but we need to start thinking about it now,” Reed said.
Kuhl said that council is being proactive to address the pension issues and stabilize the budget but they also want to do right by the city’s employees.
“Every city employee means something to each one of us,” she said.