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Lawmakers to take look at pension fix
Legislators hope that a draft of a fire and police pension proposal will be taken up in a special legislative session later this year.
Purchase this photoCHARLESTON -- Legislators hope that a draft of a fire and police pension proposal will be taken up in a special legislative session later this year.
Huntington officials met with legislators in Charleston on Wednesday to discuss the first draft of a proposal that aims to solve West Virginia cities' budgetary woes caused by increasing police and fire pension funds.
Developed by Sen. Dan Foster, D-Kanawha, the proposal is structured after a plan crafted by Huntington officials and local legislators. The proposal discussed during the Joint Pensions and Retirement Committee includes putting new hires into a new, less costly retirement system.
The proposal will not affect police and fire personnel that are already involved in a pension fund. Foster said legislators, fire and police representatives, municipalities and the House and Senate Pensions and Retirement Committees helped develop the proposal.
In April, Gov. Joe Manchin told Huntington that if it is going to resolve its pension crisis, the city needed to devise a plan that includes sweeping reforms but does not rely on state funding. Manchin spokesman Matt Turner said Wednesday the governor is encouraged by ongoing efforts to develop a plan.
Not knowing the details of the new proposal, Turner said Manchin would consider putting the proposal on the agenda of a special session. But before it would go to a special session, Turner said there will have to be a consensus by fire and police personnel, municipalities and legislators.
Foster said his goal is to have the proposal included on a special session agenda.
West Virginia Municipal League Director Lisa Dooley said Huntington along with a number of other municipalities are suffering from rising police and fire pension costs. West Virginia municipalities are in trouble and the proposal can help, she said.
"This plan, the concept, can benefit Huntington and keep the city out of bankruptcy," Dooley said. "If Huntington is telling you that this will work for them, please give them a chance to solve their own problems."
Huntington will spend more than 20 percent, or $8.8 million, of its $40 million budget on pension costs this year.
Under the current funding method, those costs will rise to $12.4 million by 2015 and will not reach their ceiling until they hit approximately $20 million between 2020 and 2022, according to the city's finance department.
Huntington's unfunded liability stands at about $130 million.
The total unfunded liability is the amount that a city would have to pay out to all of its employees if they claimed their benefits at the same time. While the chances of that happening are slim, the unfunded amount grows by about $1.2 million every time the city hires a new police officer or firefighter.
"Within 13 years, 94 percent of our budget will be spent on pension and personnel costs," Huntington Deputy Mayor Tom Bell said. "That is a number that is intolerable as far as being able to provide services to the city."
Bell said the city's last six retirees are eligible for $1.5 million each in pension benefits but have earned less than $900,000 during their time working for the city. Bell said the current pension plan is "out of control."
"We do not look forward to the prospect of having to go into receivership to alleviate this problem," Bell said. "But unless we do something, (declaring bankruptcy) is a very unpleasant but viable option."
Under the proposal, current police officers and firefighters would remain under the existing pension plan, but the unfunded liability would be reamortized over a 40-year period.
Doing so would limit the Huntington's annual contribution to no more than $8.4 million, which would occur next year. The annual contribution then would slowly decrease over the course of the reamortization period, according to information prepared by the city's Finance Department.
Carl Eastham, a Huntington firefighter and secretary/treasurer for the West Virginia International Association of Firefighters, said he is against the reduction of benefits under the proposal -- about 30 percent -- for new firefighters. He hoped the issue can come to a conclusion soon and that both fire and police representatives will be actively involved in developing legislation concerning their pension funds.
