Sign In | Create an Account | Welcome, . My Account | Logout | Subscribe | Submit News | Contact Us | All Access E-Edition | Home RSS
 
 
 

Mayor Wants Pension Solution

April 20, 2014
By IAN HICKS - Staff Writer , The Intelligencer / Wheeling News-Register

WHEELING - A serious discussion by state legislators on the "sorry" state of municipal police and fire pension plans throughout West Virginia is long overdue, Wheeling Mayor Andy McKenzie said.

The state controls virtually all aspects of municipal police and fire pension plans, from retirement age and benefit levels paid to the ways cities invest pension assets, including the allowable ratio of fixed-income securities versus equities securities and even what stocks may be purchased. International investment is forbidden in West Virginia, for example.

Even cities such as Wheeling that have received expanded self-governing authority through the Municipal Home Rule Pilot Program are largely powerless to do anything about the mounting problem. Any changes to municipal police and fire pension plans would have to come through the Legislature.

Better to act now, McKenzie said, before it's too late. He believes the Legislature should form a study group as soon as is feasible to take an in-depth look at the problem.

"You've got to start talking about these things, or you're never going to be able to solve them," McKenzie said. "We have very little control over our pensions. ... We need the Legislature to understand that doing nothing is not an option."

A study conducted by the Bridgewater Associates investment company paints a gloomy picture for public pensions, and the problem isn't limited to West Virginia. It estimates that 85 percent of the nation's public pensions could fail within 30 years, based on the prediction that current actuarial rate-of-return assumptions - 7 to 8 percent, in most cases - are wildly optimistic in today's economy.

McKenzie stressed that there's no immediate threat of Wheeling's police and fire pension funds going under, adding they consistently take in more than they pay out year to year. But it's unclear whether Wheeling is among cities for which Bridgewater is predicting long-term danger.

"At this point, I don't know the answer to that," McKenzie admitted.

At last check, Wheeling's total unfunded liability in its police and fire pension programs stood at about $85.6 million - a significant amount, but one that pales in comparison to some of West Virginia's largest cities, including Huntington and Charleston, where liabilities reach well into nine figures.

McKenzie said the city has a moral obligation to its retirees to provide the benefits for which they worked all their lives and have every right to expect will be there.

"If the Legislature does nothing, they're going to force cities to break those promises down the road," he said.

Wheeling has a defined plan to continue making gains in its police and fire pension funds, and its pension solvency schedule, which runs through the 2023-24 fiscal year, shows the funds continuing to take in more than they pay out.

But it's not as simple as it sounds.

In order to keep up with that schedule - and comply with state law - the city must step up its contribution to the funds by 7 percent each year until they are at least 75 percent-funded. Wheeling's police pension fund is 42 percent-funded, and the firefighters' plan is just 32 percent-funded.

Those increases year after year add up quickly. During the new fiscal year that begins July 1, taxpayers will contribute about $3.8 million to the pension funds. That figure will increase to $4.1 million in 2015, $4.4 million in 2016 and $4.7 million in 2017 - meaning just three years from now, Wheeling will have to come up with $900,000 it doesn't have today.

There are only two basic ways to do that: Raise additional revenue through taxes or fees, or reduce employment and services. People are living longer and retiring sooner, which only exacerbates the problem.

"That's why most corporations don't have pensions today. They just can't afford them," McKenzie said.

McKenzie, a former state senator, said there are any number of reasons why the Legislature may be reluctant to act. Complicated, controversial problems tend to get pushed to the back burner, he acknowledged, but he hopes it won't take a bankruptcy filing in one of West Virginia's major cities - like Detroit was forced to do last year - to convince them to tackle the problem.

"Sometimes, those types of things will have to happen before the Legislature will make those changes," he said, adding, "Wheeling is not in that situation."

 
 
 

EZToUse.com

I am looking for: