Editorial: City, state need to keep working on pension issue
In 1993 the City of Huntington contributed about $1.3 million to the pension funds for police and firefighters. That was about 6 percent of the city budget.
This year that contribution will be $10 million -- about 25 percent of the city's budget.
That squeeze is the answer to many of the questions residents have about the city's financial challenges, from where their tax dollars have gone to why their street has not been repaved.
While 2009 legislation helped keep those payments from rising even further and likely bankrupting the city, the problem is still far from "fixed." So, it is good to see the Huntington Regional Chamber of Commerce taking another look at what can be done to reduce those costs over time.
The report released this week confirms there are few easy answers or "silver bullets" when it comes to the pension costs. The city underfunded the plans for years, and now the long-term obligations have come home to roost.
The 2009 actions already have moved new hires into a plan administered by the Consolidated Public Retirement Board, and making major changes to the old plan would require state legislation. But the report, developed by Marshall University economist Cal Kent, does note a few things that could be done on the local level.
The pension funds are managed by two local pension boards, one for fire and one for police.
Those boards are authorized to increase member contributions from the current level of 7 percent of their pay to 9.5 percent. Neither of Huntington's boards have pursued that option, the report says.
The local pension boards also control how the funds are invested. That is an important role, because the goal of a successful pension fund is to pay much of those retirement benefits from earnings on investments. The report suggests the investment earnings for the local pension funds are not as strong as those for other funds in the state.
While the 2009 legislation created a Municipal Pension Oversight Board at the state level to monitor and improve the performance of the existing local plans, neither local board has submitted reports to MPOB on their investment policies and costs. Requiring the local board to invest in state managed funds would require a change in state legislation.
The report also discussed more dramatic options such as using bonding to cover pension obligations, but those also would require close study and state action. Interestingly, Kentucky is discussing some of the same options for its pension plans.
It is critical the city meet its pensions obligations. But with 25 cents of every city dollar on the line, it is also critical the city continue to look for ways to reduce those costs. The chamber study helps keep that mission top of mind.