Task Force Eyes $700M Pension Hole

Thomas Breen photoThe two city pensions are each currently funded at around 40 percent, leaving roughly $700 million in unfunded liabilities.

A new task force consisting of alders, city staff, and pension fund trustees aims to try to figure out how that happened, as well as how to get those funding levels up.

On Monday afternoon, the group, the Pension Task Force, held an inaugural, half-hour meeting on the second floor of City Hall.

The four task force members who showed up forged a loose timeline and a broad set of goals around how it will realize its goal of delivering pension-related recommendations to the Board of Alders. In particular, those recommendations will focus on how the city and the alders should tackle the roughly $700 million in unfunded pension liabilities borne by the city’s two defined pension plans, the City Employees Retirement Fund (CERF) and the Police & Fire Pension Fund (P&F).

Board of Alders President and West River Alder Tyisha Walker-Myers, who helmed Monday afternoon’s meeting, said that the body plans to prioritize long-term fixes as opposed to short-term shortcuts for the city’s underfunded pensions.

“As a city we understand where our pressures come from,” she said, “but sometimes it’s not really clear how we lay out a plan for a number of different years, instead of going year-by-year.” The task force, she said, will strive to lay out that multi-year plan.

The second-floor City Hall meeting room was all but empty for the inaugural task force meeting.

In addition to Walker-Myers, the task force members who attended were city Controller and CERF Trustee Daryl Jones; city Deputy Economic Development Director and CERF Trustee Cathy Graves; and P&F Vice Chair, Trustee, and firefighters union representative Patrick Cannon.

Also in attendance was city Director of Legislative Services Al Lucas, who is staff to the committee. East Rock Alder and task force member Charles Decker did not attend because of what he told the Independent was a scheduling error on his part. Walker-Myers said that the mayor and the Board of Alders each still need to appoint one more member to the task force to bring the body’s total number of members up to seven.

The only members of the public present were Downtown Alder Abby Roth and Downtown resident Lee Stump.

“Health care and pensions are big pressures on our budget,” Walker-Myers said. To that end, the Board of Alders passed policy amendments at the end of last fiscal year that called for the creation of a health care task force and a pension task force. The current fiscal year’s budget allocates $25,000 towards each task force’s operations.

Walker-Myers said that the general goals of the pension task force will be to understand how the two city pensions got to their current levels of underfunding, and to present to the Board of Alders on how the city can more responsibly fund its pensions going forward.

As of the end of June 2018, CERF had around $170 million in its pension fund. As of the end of May, P&F had around $316 million.

Jones said that the city made this year’s $57 million budgeted and actuarially recommended combined contribution to the two city pension funds at the end of October. Under Mayor Toni Harp’s leadership, he said, the city has reversed two decades of underfunding the pensions during the DeStefano administration, helped reduce the pension funds’ assumed annual rates of return from over 8 percent to 7.75 percent, and has always made its full, budgeted contribution to CERF and P&F.

He claimed that the Harp administration has also saved the city over $1 million each year through imposed efficiencies and shared legal and investment services between the two funds. Furthermore, he said, Harp was recently recognized by the National Association of Securities Professionals (NASP) as 2018’s Trustee of the Year.

Cannon reminded Jones that the city tried to withhold a portion of its pension fund contributions at the end of last fiscal year. He cautioned against waiting until the end of the fiscal year to make the city’s annual pension contributions. “You lose time,” he said. “You lose opportunities to earn.”

The task force members focused the rest of the meeting on who they would like to invite to present at future meetings, including representatives from the city’s independent Financial Review and Audit Commission (FRAC) and the state’s Municipal Accountability Review Board (MARB); which public pensions funds they would like to research further, including those in Hamden, Detroit, and New York state; and why they think the problem of underfunded pensions is one worth grappling with now.

“I have children” Walker-Myers said. “I want them to have a job where they have a pension, too.”

Jones recommended that the task force deliver some recommendations to the alders before the beginning of the next budget season in the spring. Walker-Myers and Cannon both said that they want to take their time and figure out exactly what is the best solution for a long-term pension fix.

“We didn’t get into this problem quickly,” Walker-Myers said, and the city won’t get out of it quickly either.

Roth recommended that the task force meet at a time more convenient for working people and other interested members of the public.

“I think this is something in the public interest,” she said, and that the task force should encourage public attendance and input.

Walker-Myers said that the task force’s monthly meetings will likely not always be at 4 p.m. on Mondays. However, she said, after polling the fellow task force members, the next meeting will be on Monday, Jan. 7 at 4 p.m.

Stump, a long-time New Haven resident who works in financial services, is Roth’s husband, and was the only other member of the public to attend Monday’s meeting, criticized the composition of the task force in an emailed comment sent to the Independent and the New Haven Register. He wrote that two alders, two city officials, and a city employee, three of whom are already members of the two pension funds, are not satisfactory independent observers of the current pension operations.

“The said task force has no independence much less expertise in the nature of the issue, municipal bonding funding and financing,” Stump wrote. “The five of seven named members are part of the present problem and it is is unreasonable to expect that they can be ‘the’ solution.”

Walker-Myers sent the Independent the following statement on Tuesday afternoon: “This first informal meeting of the taskforce was simply to lay out the expectations for the members. That dedicated and informed membership agreed to focus on finding solutions to real issues by having meaningful and respectful dialogue based on presentations from experts. We have a tremendous amount of work to do in the next couple of months and we encourage and welcome all positive and constructive ideas.”

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posted by: WereUthere? on December 4, 2018  9:34am

The last two paragraphs of this article is all you have to read.

posted by: robn on December 4, 2018  11:04am

The Pension Funds have always had a union representatives on their board. So they answer to the question “how did this happen” is that they let it happen in a gigantic game of chicken with the reality that city can’t afford them.

This task force is manned by union shills.

Also, an assumed annual return of 7.75% is just as stupidly unrealistic as 8%.

Remember voters, part of the reason why Mayor Harp added $80,000,000 of pure interest payments to the city’s debt this year was to quietly tuck a little more padding into the almost insolvent pension fund.

posted by: Dennis Serf on December 4, 2018  11:14am

Quick Question: How many people on this Task Force are taxpayers who live in New Haven and not affiliated with the union, i.e. the people who will be paying the tab but not receiving any benefits, i.e impartial?.


Dennis Serfilippi
https://newhavenct.squarespace.com/

posted by: Noteworthy on December 4, 2018  11:22am

Bury the Lead Notes:

1. The last sentence should have been the lead sentence: “The five of seven named members are part of the present problem and it is is unreasonable to expect that they can be ‘the’ solution.” The five insiders should be a minority on this task force, not a majority.

2. They want to study how we got here? Why? Here’s a quick lesson: 1. The unions got greedy. 2. The politicians on both the BOA and city executives all wanted to get reelected so they made promises we can’t keep; 3. The city paid only the required minimum and 4. The city intentionally over-stated its return. This has continued under Harp.

3. As for Comptroller Jones - you protest too much. If you did your job better, you’d have less to defend. The reality is you’re on the pension board and you run the budget. Both are a mess.

4. Fixes: Get real professionals at the table with real expertise. Lower the expected return. Lower the benefits. Don’t include overtime in pension calculations. Lower the number of city staff and raise the minimum age for which you can collect a pension regardless of the number of years on the job.

5. You’re also going to have to create more room in the budget - that means lowering other costs. Shrink the budgets and the headcount in the city that is eligible for pensions. With the extra money - make larger payments than what is required.

By the way - did you know that citizens have been crying foul on the pensions and the “return” for at least eight or ten years?

Note to Tyeshia: the only way your kids can get a pension today is if they work for the government. Is that all the expectation you have?

posted by: HewNaven on December 4, 2018  11:46am

Did anyone ask DeStefano about the lack of pension funds?