CHARLESTON -- The state Senate passed legislation Tuesday that would help West Virginia cities whose budgets are handcuffed by ailing police and fire pensions.
The bill (SB 667) is being touted by police officers, firefighters and city officials as a long-term fix to the problem, which has crippled Huntington's ability to provide services such as paving streets and hiring police officers.
Pensions now account for 20 percent of Huntington's $38 million budget. Under the current funding formula, the city's annual contribution to the funds will steadily increase to $16.1 million by 2018, far exceeding the traditional growth rate of its budget.
City officials and state lawmakers who represent Huntington, however, say that Huntington could be forced into bankruptcy long before then if the issue is not addressed.
"This is a long-term fix," said Sen. Dan Foster, D-Kanawha and the lead sponsor of the pension reform bill, which passed the Senate by a 23-7 vote. "This is not putting off the inevitable. It's a true attempt to provide funding streams that will allow cities to make their contributions and provide stability."
The bill now moves to the House of Delegates.
Under the proposed legislation, cities would switch funding methods and reamortize their pension funds over a 40-year period. Those changes would level out annual contributions for many cities that are now faced with a roller-coaster trajectory of payments.
Existing police officers and firefighters would contribute 8.5 percent of their pay to the funds each year, while all future hires would contribute 9.5 percent. The current employee contribution rate is 7 percent.
For the plan to work, the state will have to infuse some cash into the pension funds.
The bill proposes to increase from .55 percent to 1 percent a surcharge that people pay on fire and auto insurance, with all of the new revenue going to help out municipal police and fire pension funds. Architects of the bill say the tax hike will only amount to an additional $2 to $6 a year for most policy holders.
The bill also would reallocate a small portion of an existing 1 percent tax on fire and auto insurance policies to municipal police and fire pension funds. The portion that would be reallocated -- roughly $2.5 million a year -- currently goes to teachers' retirement.
Charles Delauder, president of the West Virginia Education Association, told the Senate Finance Committee last week that his union is not opposed to the change.
Altogether, the surcharge increase and reallocation would funnel about $15 million annually to underfunded police and fire pension funds.
The bill received some opposition on the Senate floor. Sen. Frank Deem, R-Wood, called the legislation a "pure and simple bailout" for police and fire departments. He said police and fire unions have strong-armed city officials into giving them lavish benefits and now they are looking to the state for help.
"These people have just been too generous with themselves and have pressured their city councils to do the same thing," Deem said. "What are they willing to do to help out?"
Foster said the Legislature should bear some responsibility because it gave cities the option of switching to an "alternative" funding method in the early 1990s. That funding method veered many of the pension funds away from being fiscally sound, he said.
"To say the state is not accountable for what happened here is a mistake," Foster said.
Foster also noted a new oversight board would oversee the municipal pension funds to track investment performance as well as how individual pension boards grant disability and retirement benefits.
Carl Eastham, secretary/treasurer of the West Virginia Professional Firefighters Association and president of the Huntington Fire Department's union, said the bill is projected to stabilize all police and fire pension funds in the state by 2048, the end of the 40-year reamortization period.
All but two of the 53 local pension funds would be funded at 100 percent or better, he said.
Huntington's fire (3 percent funded) and police (9 percent) pension funds are in the worst shape of all right now. Statewide, the funding ratio is at 22 percent. Both of Huntington's pension funds would be funded at 100 percent by 2048, Eastham said.
"It's not a Band-Aid any time you can bring almost all of the funds to a 100 percent funding level," he said.
7-day Archive
