Managing City Retirement Funds
West Virginia legislators are right to be concerned about municipal pension programs in many cities. A substantial number are dramatically underfunded.
But lawmakers are approaching the challenge from the wrong direction.
As we report in a story on page one of today’s newspaper, a bill in the Legislature would require municipal police and firefighter pension investments to be handled by the state Investment Management Board if the city programs are less than 30 percent funded.
The idea, of course, is to force officials in municipalities with underfunded police and fire pensions to invest their money in the state program, which has a reasonably good record of earnings.
In Wheeling, the police pension fund earned a 12.65 percent rate of return during fiscal 2016 and 2017. The firefighters’ pension fund earned 12.27 percent. Meanwhile, the state Investment Management Board reaped a 15.4 percent return. Both local programs are less than 30 percent fully funded.
City officials want flexibility to make their own decisions. They should not be forced into the state system, they say.
For firefighters and police officers hired after November 2014, the legislative bill has no bearing, anyway. Newer officers and firefighters go into the state program.
But the plan is a bad one simply because the trigger is the level of funding overall — not how well a municipality’s own investments are being handled. What if a city pension fund’s investments were earning higher rates of return than those available through the state?
A state law requiring that a municipality’s privately handled pension investments must be folded into the state plan if returns are dramatically below those available at the Management Board may make sense.
One suspects that situation would not persist for long before retirees and taxpayers would demand the change, however.
Wheeling’s returns may prompt city officials to take a look at the state program, in order to earn more money for pensions. At this point, however, they should not be forced to make the change.