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Pension bill faces uphill battle

Mar. 07, 2008 @ 12:07 AM

CHARLESTON -- Proposed legislation that would help West Virginia cities whose budgets are strapped by ailing police and fire pension funds suffered a near-fatal blow Thursday.

Volunteer firefighters mounted opposition to the bill earlier this week, saying they should get a portion of the revenue from a proposed tax increase that would be used to shore up the municipal pension funds.

Though the legislation was amended in a House Finance subcommittee Thursday to give volunteer firefighters some of that funding, several rural delegates view the bill as a bailout for cities.

"Basically, what they're trying to do is similar to refinancing a mortgage and making a third party pick up the tab," said Delegate Bob Ashley, R-Roane and a member of the finance subcommittee.

With the bill failing to advance from the House Finance Committee to the House floor on Thursday, the bill's supporters acknowledged it now faces an even more difficult path to adoption. The Legislature's 60-day session ends at midnight Saturday.

A bill must be read in front of the House or Senate on three separate days before passage. That rule can be waived, but it requires a four-fifths vote, or 80 members of the House in the pension bill's case.

Because the bill has been amended in the House, the Senate also would have to concur with the changes.

House Finance Chairman Harry Keith White said Thursday evening it didn't appear there were 80 votes to bring the bill to the House floor.

"This is a pretty big issue to hurry into," he said. "If we don't do it the right way, we could be right back where we started."

The bill has been touted by city officials and municipal police and fire departments as a long-term fix to the problem, which has crippled cities' abilities to provide services such as paving streets and providing police and fire protection.

Pension contributions now account for 20 percent of Huntington's $38.5 million budget. Under the current funding method, the city's annual contribution to the funds will steadily increase to $16.1 million by 2018, far exceeding the traditional growth rate of the city budget.

Huntington officials, however, say the city could be forced into bankruptcy before then if the issue is not addressed.

Under the bill, cities would be able to change how they fund their pensions. The current funding method is "flawed beyond repair," said Lisa Dooley, executive director of the West Virginia Municipal League.

Several cities are faced with years of skyrocketing contributions that won't do anything to stabilize their pension funds, she said.

The legislation also would increase from .55 percent to 1 percent a surcharge that people pay on fire and auto insurance, with all of the new revenue -- about $12.5 million -- going to help out municipal police and fire pension funds. Architects of the bill say the surcharge increase would only amount to an additional $2 to $6 a year for most policy holders.

Police officers and firefighters would increase their annual pension contributions to 8.5 percent of their pay from 7 percent. All new hires would kick in 9.5 percent annually.

Delegate Tom Campbell, D-Greenbrier, took issue with the fact that some cities would see their annual pension contributions reduce drastically.

Huntington for instance, will pay $8.2 million to its police and fire pension funds next year. If the bill were to pass in its current form, its contribution would drop to $5.5 million.

"My struggle is I would have to go back to Greenbrier County and tell my constituents that they are getting a tax increase so the citizens of Huntington can have a tax decrease," Campbell said.

Dooley said the bill would essentially refinance municipal pension plans over a 40-year period. While some cities would pay less in the beginning, they would ultimately contribute more than what they are under the current funding method.

Sen. Dan Foster, D-Kanawha and the bill's lead sponsor, told the House Finance subcommittee Thursday that the bill should be viewed as an opportunity to fix a long-term problem that will only worsen if the Legislature doesn't act.

If the bill doesn't pass, "it will probably mean default for one or more of these plans, which will force us to make even more drastic decisions," Foster said.

White said there are other options if the bill fails. One is to have a one-day special session dealing with the issue during legislative interim meetings, he said. Another is conducting an interim study on municipal pensions and introducing a revamped bill next year.

Some members also have kicked around allowing cities to implement a 1 percent sales tax to help their pension funds, he said.

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