I must say I am impressed with those numbers, the assets per person are 2-4x times larger than any other plan. Plus you 10 year returns only slightly lag the folks at Harvard and Yale. You actually have a secure pension.
The board is comprised of some smart guys who are scrupulously honest - they know what would happen to them if they weren't. And the business manager is a retired cop who was my very first sergeant - and he was legendary for being the king of LBYM guys in the agency. He makes every dime squeal before it claws its way out the door.
Ziggy is also probably right, current benefits are probably completely safe. Still when you are asking the public to come up with $3,000 - $4,000 a person to fund existing pension benefits for government workers, it doesn't see far fetch to imagine a taxpayer revolt.
I agree completely. The situation here is somewhat different in that the pension is not going to the city and saying "we're underfunded because of investment losses and because we promised too much. Please give us more money".
Our situation was that we were 100% funded, and while the pension did increase some things, it was all well within what it was capable of doing with room for error. They did screw up when the city came and pleaded poverty and begged to be allowed to
temporarily reduce what they had been paying all along. Something that had been in the budget every year up to that point. It was supposed to be paid back when the city got back on its financial feet, but the pension demanded an agreed upon date when they city would resume making its normal percentage.
The strange and questionable thing is that the city should have been doing well at that time. I wonder why nobody has ever stepped forward to ask "where did all the money go?"
At the time there was no contract between the city and its employees, the police union or the pension board. There was a written agreement between the city and the pension, but not as part of an employment contract because one had never existed up to that point.
The real disaster came when they agreed to let the police have meet and confer powers to negotiate a contract. The city, still pleading poverty, set out a somewhat ambitious agreement with the cops (the mayor hated firemen and told them to go screw). But put a number of hooks on how the money could be paid out (like minimal across the board raises so the firemen wouldn't benefit).
The city was facing massive retirements from the police department with a horribly uncompetitive salary structure. They were desperate to hang on to the police they had because they couldn't attract new hires to save their lives. So, knowing that a lot of us were well past minimum retirement age, and many of us were thinking about retiring soon, they forced the union to stack a lot of the increases as things that dramatically boosted pensions - if you would only stay a few more years. The result was a bunch of grumpy old cops hanging around saying "if I can just make it to 2004". My 60 something desk officer was dying from cancer but hung in for another couple of years just to get the money for his future widow.
There was even a bumper sticker floating around that said "Out the door in 2004!"
2004 also happened to be when the sitting mayor would be out of office due to term limits.
The union, being the sole employee bargaining agent, took the city's offer because the city said "it's that or nothing". The didn't bother to call the pension board and ask what they thought. The pension was presented with the bill as a fait accompli.
There was bad blood between the pension and the MBA.
The city announced that they would not be able to pay the overdue percentage of salary as they had promised just yet, and to be honest, it didn't think it could go back to paying the regular percentage either - the pension board was told to to stuff it.
The pension board ran down to the courthouse with their hotshot outside litigators they just hired and filed a lawsuit. The new mayor came into office and promptly puked all over the place. "I can either pay the scheduled raises to active employees, or fund the pension properly, but I can't do both."
The pension board's lawsuit was still sitting at the courthouse, and the MBA started looking at litigators and rattling its sabers. But the pension board was realistic. They held the line on what the city owed from its past normal obligations, held the line on anybody already retired getting what the contract gave them, but threw everything else up for negotiation. As the president of the board told me at the time, "We never agreed to any of that s&%t in the first place, why should we cash checks somebody else wrote when we don't have the money to pay for it?"
The city negotiated a separate contract with just the pension board, although I'm sure the union had some say. The majority of the really egregious BS was tossed and new hires got a whole new deal. Anybody already vested had a three year grandfathering on some elements of the old contract before they were converted to all of the provisions of the new contract, while some things went into effect immediately. I was lucky enough to be just about completely maxed out in every category under the old contract so I yanked the pin and said adios mother something-or-anothers.
In some respects the pension is culpable in this mess because they let the city neglect its obligations for a period of time. In retrospect, it was like lending money to a crack fiend.
I think the city's catchup provisions, and some concessions they had to make in order to get the pension to give up some claims, put the city in the hole about 60-70 million. And of course the city is paying more than they were for the preceding few years, but those prior years contributions were artificially lowered.
So, in reality, our pension is not asking for more money to make up for shortfalls due to its avarice or incompetence, but mostly asking for the repayment of a loan that was aggravated by the avarice and incompetence of the debtor.
Now, the city is in deep debt over pension issues, the 70 odd million that they owe the police pension is just a drop in the bucket. They owe ungodly amounts to the municipal employees (non police/fire) pension, which is a fund that they basically ran without any competent oversight (and was apparently the home of shady sweetheart deals for politically connected investment firms). They also owe a nice chunk to the firefighters' pension because the new mayor got jammed up into writing a nicer contract than he would have preferred to (they got for real collective bargaining, not that crappy meet and confer stuff we had).
The city also managed to write a boatload of pension obligation bonds, some of which it invested in as well (borrowing money from yourself - what a concept!), as well as signing the rights to the city's convention center hotel over to the municipal employees' pension fund.
It will be interesting watching the city dig itself out of this mess. I wish them the best of luck, no joke I really do.
In regards to a taxpayer revolt in my city over this issue, I've got to take a realistic stance. We, meaning the pension board, didn't screw this up and did everything in our power to fix it. We feel really bad that your elected officials borrowed money from us that they weren't necessarily capable of paying back responsibly, but we want our money. You should have kept a better eye on the people you hired to run the city, and it's not like they did this in secret. The budget is a very public event that is openly debated every year.
The union/MBA was stupid and greedy, but it's not like we had collective bargaining for any of the stuff we got in the first place. The city offered what it said it could afford before negotiations ever started (the mayor wrote a dollar amount on a napkin over cocktails, I'm not making this up), it even told us how to structure the money in the manner they preferred, and in the end they decided what they wanted to give us and what they didn't want to give. We had voice, but on our end there was no power because meet and confer doesn't give it. Even after the contract was done there were friendly members of city council saying to us privately "Oh, you guys got screwed - you should have asked for more money - the votes were there to get it."
I think the only thing we did wrong was doing business with a bunch of politicians.