Thursday, February 28, 2008

Who Made The Decision NOT To Fully Fund The Pension Plan, Why Was It Made And When Was It Made? Revised 5:36 PM

At the media budget briefing last Tuesday, the city basically said that everything would be ok if it weren't for the shortfall in the police and fire department pension plan.

Sometime, somewhere back in time a decision was made NOT to fully fund this plan. Sometime in the past, someone had to have looked at the plan and noticed that is was coming up short on funding. A conscious decision had to have been made NOT to fully fund the plan.

If a decision wasn't made and the fund just drifted along, getting deeper and deeper in the hole each year, then someone in city government, present or past, needs to be held accountable.

How do I find out this information? If you know the answer or know where to send me to look, email me, the link is in my profile. Replies and inquiries may be published unless requested otherwise.

Reading the forums on the SN-L,it seems that the pension fund was having difficulties when the City Council took it over several years ago. One commentator who goes by the moniker "Ben There", has opined on the subject of pension board in several posts. Ben There says, (speaking of the pension fund shortfall):

Posted: Thu Feb 21, 2008 3:25 pm Many of you are just wrong. First, spending money or not spending money on the square has no effect on the pension issue. It is apples and oranges. Secondly, the hole in the pension (to make it fully funded) is between $70 and $100 million dollars. Salaries and benefits for the city's operating budget are about $75 million.

You can't "steal" earmarked money and put it toward the pension money. You go to jail for that.

According to the pension board, there are 3 reasons the pension fund is underfunded: the board whose members were selected by the police and firemen did not invest the money in the right assets, the actuary hired by the board changed his assumptions (in other words he decided people were going to live a lot longer than the board originally thought so that meant all of a sudden you had to have more money in the retirement fund), and finally the benefits were too rich.

Changes have been made. The board has been reconstituted, and the investment policy has been changed, and the benefits for new hires have been changed. All this was done over the opposition of the police and firemen.

But it may still be too late. The solutions at this point are simple if painful. You can vote in a tax increase to shore up the fund, you can ask the voters to reduce benefits (it takes a public vote), or you can lay off enough people at city hall to make up the shortfall.

But those of you who think cutting the salary of "the person in charge," or not spending money on the square will fix the problem should go back to your comic books.

Ben There was answered by "EasyDoesIt":
Posted: Thu Feb 21, 2008 3:49 pm. Not sure where Ben There is getting his facts, but he is wrong on his. I just checked with three different board members to see if that is what they said. The 3 reasons been there stated are flat wrong. First of all, the board members do not invest any funds, they are not allowed to. The hire a variety of money managers, who in turn invest the funds. The board members were never allowed to set the perameters for investing, that has always been done by Tom Finnie and city council, and just recently, when they finally figured out they were way off base, they have now allowed the board to tell the money managers, that they have loosened the parameters, and can do some other investing that Finnie would not allow. Second of all, Tom Finnie wanted the assumption set at a hire rate, and the board argued for years it was to high, and now since Finnie is gone, they have been able to lower that rate, which is better for the plan. The board has never said the benefits are too rich. These were all negotiated by the members, and were only obtained by giving up raises, as suggested by Tom Finnie. The members gave up cash money, in exchange Finnie increased the benefits. It is cheaper for the city to increase benefits than it is to give money. In other words, Finnie kept adding these benefits, and instead of taking the cash that was saved and putting it into the plan as promised, he built failed ice rinks, bought and sold the Heers building a few times, and built parking garages at a loss, then sold them at a huge loss. Now it is time to pay the piper, and Tom is long gone. Perfect plan on his part, put the members of the fund off for years to come, then retire, and leave the bill to somebody else. Ben There should finish the comic book he was reading instead of making comics up.

If you care to take the time, go and read all the posts by Ben There and EasyDoesIt. They have different viewpoints on the pension fund problems and other subjects as well. Here is the link, you will have to enter their screen name in the search area next to "search for author".

I should mention that Ben There commented on a piece I wrote for "Ozarks Left" when the budget crisis first developed. He comments:
Mon Feb 25, 2008 10:10 pm The one thing that is clear after reading your blog is that you really don't know what you are talking about. You go from apology to certain statement to apology. Anyone who tried to follow your thinking would be confused. I have an idea: why don't you try getting the facts before you just hold forth?
Dear Ben There, You may be right. Sincerely, Jim Lee.

1 comment:

tom said...

According to one Mayor Pro Tem Gary Deaver there is NO pension shortfall since the city has a balanced budget and is required by MO statutes to be that way.

According to some of my sources the pension funding comes out of the general revenue and according to the audit the pension plan is short 140 million.

I could be mistaken but I don't think I was taught math in this manner and it is quite hard to grasp the concept of balanced budget and 140 million in the hole.