By Mannix Porterfield
An ongoing effort to bail out municipal police and fire pensions mired deep in red ink isn’t looking at putting any new tax burden on West Virginia residents, one of the major stakeholders says.
In fact, says Lisa Dooley, executive director of the West Virginia Municipal League, if and when Gov. Joe Manchin calls a special session to deal with some $650 million in unfunded liabilities spread across the state, he is adamant that no proposal contain higher taxes.
Specifically, any plan that would raise the surcharge West Virginians pay on home and casualty insurance is definitely off the table.
Dooley says 53 plans in Class I and II cities are in trouble, and liabilities also are challenging at least 15 Class III cities.
“Huntington is the one that is the most severely underfunded,” Dooley said Friday.
“Charleston and Wheeling are second and third. They’re much larger and older plans. Their retiree numbers have passed active members. And when you see that happening, you have less people contributing and more people taking out. It doesn’t take long to deplete.”
Comparatively speaking, it poses the same kind of threat some envision some years from now in Social Security as the baby boomers head into retirement.
What stakeholders are discussing at this stage is the so-called “Huntington Plan” that calls for a 40-year amortization of the existing liability, working in the same fashion as a second mortgage on one’s house, coupled with the creation of a second fund exclusively for new hires, Dooley explained.
“You still pay the same money, but if you have a longer time to pay it out, the payments become more reasonable,” she said of the proposal.
So far, no such bill is in draft form, and Manchin said last week he wouldn’t call a special session — scuttlebutt has suggested either August or September, dovetailing with interims meetings — unless there was a consensus.
“Right now, the plans are designed under an alternative funding method which is 7 percent compounding of the previous year’s funding,” Dooley said.
“They’re designed to go to zero and then spike upward with a tremendous obligation and contribution from the cities. This 40-year re-amortization would level it out and make payments more manageable.”
Beckley is in good shape
Beckley Mayor Emmett Pugh says his city’s police and fire pension plans are healthy, one standing at 70 percent, the other a little higher. In some cities, the percentage has fallen to 2 and 3 percent.
“We have two of the best funded plans in the state,” Pugh said.
“Are we at 100 percent? No, we’re not. But when you look at our percentages, we’re in very good shape. We try to stay on top of things and do what we can and go from there.”
Beckley’s funds are managed by City National Bank.
“We make our payments like we’re supposed to,” the mayor said.
“This has allowed us to have two good funded plans and really not have the worries of the Huntingtons and the Charles-tons of the world. I think we’ve done a good job here.”
- - -
New money must enter the picture at some point, Dooley said, but the concept under discussion doesn’t entail new taxes or any state money. But legislative approval is needed to put any new plan in force.
“And this is something that is going on across the nation,” she said.
“This is not new. There are so many more pension-related issues, like the other post-employment benefits liability you’re hearing so much about. Across the nation, we’re seeing government in general, not just local government, but even state governments, starting new plans for new hires because the liability of post-employment benefits is so large that government can’t continue to provide services and fund the liabilities. They have to make a choice.”
For the most part, Dooley said, governments are using the two-tiered approach.
“I don’t think this is rocket science,” she said. “We’re probably not on the cutting edge.”
Dooley emphasized the “Huntington Plan” is being crafted as a voluntary one.
“No one will be forced into designing new plans for new hires that have to be passed by actions of city councils,” she said.
“As I have told the pension committees, if Huntington says this will work, at least give them a chance. Let them try to solve their own problems. If it doesn’t make sense for one city, they certainly don’t have to do it.”
Longevity is another factor. As people live longer, naturally the strain on pensions goes deeper.
“When these plans were designed and benefits were structured, cities had larger populations, the economy was doing well, growth in the economy was expected and built into the future obligations of cities,” Dooley said.
“That is not what has happened. Cities have lost population and folks are living longer.”
— E-mail: mannix@register-herald.com
