Editorial: Huntington shouldn't expect pension bailout from state
Huntington city government struggles with its pension obligations. Many private companies have had the same problem, and they solved it by eliminating their pension plans. Huntington can't just wipe out its entire pension plan and future obligations, for a variety of reasons.
One thing the city can do is turn to the Legislature for help. Several things are in the works, such as changes to police and fire pensions. But those require negotiations among various interests, and it's not clear yet what action the Legislature will take in this year's session.
Among all the possibilities, one that will not likely be among them is a bailout. So far, there are no indications the state will relieve Huntington, Charleston and other cities of their pension burdens. One of the reasons is that the state is reluctant to get involved in pension systems where it does not control the benefits, Rick Thompson, D-Wayne, speaker of the House of Delegates, told The Herald-Dispatch editorial board on Wednesday.
Add to that another fact. Politically, it's a hard sell to get legislators from rural and small-town areas to pump state money into pension systems in the state's larger cities, Thompson said.
In other words, Mayor Kim Wolfe and the Huntington City Council can expect some help from the Legislature this year, but city residents should not be looking for a blank-check solution.
A study by researchers at Marshall University about two years ago projected that insurance and pension benefits would to grow steadily for about a decade before they start shrinking. Health care and pension costs in 2005 accounted for nearly 27 percent of the city's budget. If changes are not made, they could increase to nearly half the budget in the next 10 to 15 years.
Huntington's newly elected officials have correctly identified the pension issue as a top priority, but there will be many tough decisions involved in finding a solution.
West Virginia state government ended the first half of its budget year with a potential surplus of nearly $75 million. Revenues for the first six months of the fiscal year, which began July 1, were $1.92 billion, or about $75 million ahead of estimates, according to The Associated Press. Personal income tax collections are also more than estimated.
Some of the surplus could be attributed to conservative estimates of revenue. That leads to careful budgeting of expenses and a higher carryover at the end of the fiscal year on June 30.
As Thompson said Wednesday, things can turn around with little warning.
"Fortunately, we're not one of the states facing a mountain of debt," Thompson told The Herald-Dispatch's editorial board. "We're telling the public we think the financial picture will get better and that we will continue to fund programs that help them with their needs. At the same time, we have to be fiscally prudent and responsible."
Thompson said the state has stayed afloat due in large part to the Legislature allocating more than $1 billion toward debts in teacher and state employee pensions since Gov. Joe Manchin took office in 2005.
"Doing what we did has made this crisis manageable," Thompson said, referring to the nation's economic troubles. "On the other hand, we've never really faced anything like we're facing now. Historically, we've seen that West Virginia goes into a recession slower than other states because it's an energy-producing state. But it also takes us longer to recover."
Clearly, as Manchin, Thompson and others prepare for the upcoming session, fiscal caution remains important. So far, West Virginia has not had to go to Congress and ask for money to bail it out of problems, as other states have done. Conservative revenue estimates and cautious spending have helped state government weather the first months of the current recession. There's no reason to change that strategy now.
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