The Times-Picayune, New Orleans, on firefighters’ pension fund obligations:

April 13

The Times-Picayune, New Orleans, on firefighters’ pension fund obligations:

The Landrieu administration is appealing a judge’s order to pay New Orleans firefighters another $17.5 million to cover pension fund obligations for 2012 — which would be on top of the almost $49 million, including debt payments, in the 2013 budget.

The city wants Civil District Court Judge Robin Giarrusso to rehear the case, arguing that her ruling is “contrary to the law and evidence.” The appeal also contends the pension fund is putting a strain on city finances in part because the fund has high administrative costs and its managers made poor investments.

Firefighters union head Nick Felton said after the judge’s ruling that he hopes his group and the city can work out an agreement.

Whatever happens with the lawsuit before Judge Giarrusso, the financial squeeze on the city cannot continue. The Bureau of Governmental Research reported last year that of every $9 the city spent on general operations in 2011, $1 went to the firefighters’ pension. Yet for years, pension officials say, the city has underfunded the system — including the $17.5 million for 2012 at the heart of the suit.

The situation isn’t healthy for New Orleans’ budget or for firefighters counting on a dependable pension. It also isn’t fair to residents who are footing the bills and may see other services diminished because of the out-sized cost of firefighters’ retirement benefits. That includes fire services. The city might be able to add more firefighters, as Mr. Felton says are badly needed, if retirement costs were smaller.

Even if the two sides reach some agreement in court, though, a long-term solution will have to come from the Legislature.

To that end, state Rep. Kevin Pearson, chairman of the House Retirement Committee, is sponsoring a package of reform bills this session for the city. The changes are reasonable and necessary to better manage taxpayers’ money and help shore up the fund, which Judge Giarrusso said is only 33 percent funded at this point.

An attempt to revise the pension system got nowhere in last year’s legislative session. It’s crucial for lawmakers to pass reforms this year. The status quo simply can’t continue.

The fund’s benefits are the most generous by far of 19 public pension plans in the metro area reviewed by BGR. Firefighters can retire after only 12 years and get a lifetime pension of 30 percent of their highest-earning years. After 20 years on the job, they no longer have to contribute to the fund. At 33 years, they get a full pension for life. BGR President Janet Howard said that benefit structure is “off the charts.”

Firefighters provide a vital public service and put themselves in harm’s way doing it. They should be able to count on a decent retirement. But the benefit costs to the public have to be reined in.

No reform will fix all the problems immediately. The mess has been decades in the making. For years the city promised firefighters pensions but put no money aside for them and initially didn’t require employees to contribute anything. In 2000, the city made a bad situation worse, plowing $171 million in bond proceeds into the stock market in a misguided attempt to shore up the fund. The market tanked, and the fund went down with it.

The pension board made its own bad investments. The board put millions of dollars into a hedge fund whose manager has been accused of running a pyramid scheme. The board has demanded its money back but has gotten nothing yet. The fund also has $140 million in real estate investments that took a hit in the 2008 housing market crash.

Essentially, the pension fund has been handled about as badly as possible since its inception a half century ago. Lawmakers need to make sure that doesn’t continue.

St. Mary Now & Franklin Banner-Tribune

Franklin Banner-Tribune
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Phone: 337-828-3706
Fax: 337-828-2874

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Phone: 985-384-8370
Fax: 985-384-4255

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