EDITORIAL: The city can avoid future pension disputes by taking action now

The Macon Telegraph (Georgia)

6/4/2012

Two things happened during a Macon City Council meeting Wednesday that almost never happen, the unanimous decision to pay $2.6 million from the city’s fund balance to settle a debt to the police and fire department pension fund — and the lack of pontification that usually accompanies any controversial city business.

The city had been contributing the required 6 percent to the fund to keep it actuarially sound. Then came the Great Recession, and the fund, like most others lost money. Police and fire retirees have a special arrangement. When the fund loses money the city has to pony up. The actuary told the city it had to do one of two things, make the fund whole in one fell swoop or promise to make it up within a given amount of time, plus interest. The city and the pension board decided to do the latter, but a judge ruled the meeting invalid where the promissory note was narrowly approved.

Fortunately for the city, in the 11 months since the agreement was approved, the city’s financial shape improved. A year ago, the city had roughly between $6 million and $7 million in its fund balance. Taking $4 million out would have put the city on thin ice. However, the city now has a fund balance of $12 million and with the council’s decision can make the acrimonius issue that included loud meetings, frayed tempers and accusations disappear.

The fire and police retirees are happier now, but the mistrust between them and the city remains palatable. The city should use this opportunity to get out of the pension business. While all on the pension plan would remain, new hires should not be allowed to join. New employees should have the option of Social Security or a 401(k)- type plan.

Fire and police retirees say they have such a sweet deal as a trade off for accepting lower wages throughout their years of service. That may be, however, municipalities all over the country are having problems living up to overly generous pension obligations and some have gone under. It’s time to erase that possibility in Macon. And, if the vote to consolidate is positive on July 31, all new hires of the new government should be offered a defined contribution plan. Defined benefit plans such as the police and fire pension are a thing of the past.

– Charles E. Richardson, for the Editorial Board

PUBLICATION-TYPE: Newspaper

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