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Editorial: City shouldn't be accountable for state's pension mistake

Mar. 24, 2013 @ 10:05 PM

The city of Huntington has been down the road of miscalculated pension fund money before, and it wasn't a pleasant ride.

But unlike recent trips on this path, the city isn't to blame for the latest error and shouldn't be forced to pay the toll this time.

Huntington was among several cities learning recently that between 1997 and 2012, the state Treasurer's Office used the wrong formula to allocate a portion of the 1 percent surcharge on fire and casualty premiums to the state's municipal police and fire pension funds.

As a result, 39 pension funds were underpaid to the combined tune of about $3.6 million, while Huntington's police and fire pension funds were among 16 pension funds that were overpaid.

In Huntington's case, the overpayment to the police and fire pension funds totaled nearly $1.4 million over that period of time.

The question becomes whether Huntington -- and other cities affected by the state's error -- will have to settle up with the state and repay that money. Let's hope not.

Huntington's municipal budget has been on shaky ground for years now, and a major factor in that has been the police and fire pension funds. Annual payments to those two funds now equal about $10 million, or about a quarter of the city's annual budget. A few years ago, state lawmakers approved changes to how the pension funds should be managed, thus allowing Huntington and other cities to opt for a plan that would keep those annual payments from growing to unsustainable levels in the coming years.

That seemed a reasonable approach under the circumstances.

But not long after, Huntington made its own miscalculation based on applying the wrong formula, and the result was that it owed a combined $2.3 million for its 2010 and 2011 contributions to the pension funds. That set off a round of sharp budget cuts, and even prompted one City Council member to start using the "B" word, or bankruptcy. The situation didn't come to that, but the episode illustrated how fragile the city's budget was -- and continues to be.

Fortunately, lawmakers in Charleston are considering a fix for the most recent error. The Treasurer's Office has proposed what is now Senate Bill 432, which would compensate the underpaid pension funds by pulling money from the state's unclaimed properties list.

Most importantly for Huntington, the bill does not require cities that were overpaid to return any of the funding. Sen. Evan Jenkins, D-Cabell and the bill's lead sponsor aptly explained the justification for that: "There's no fault on the city's or the local pension boards' part," he said. "However, it would be devastating with their fragile financial condition if they were made to pay this money back."

Let's hope a majority of lawmakers in Charleston see it that way. The city has just endured one significant setback to its budget through an error of its own; it really can't afford another jolt, one of the state's making.



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