VOL. 128 | NO. 203 | Thursday, October 17, 2013
Comptroller Letter Calls for Prompt Action
By Bill Dries
If anyone at City Hall has any illusions that the state of Tennessee is no longer concerned about city government’s unfunded pension liability, Tennessee Comptroller Justin P. Wilson cleared up that point with a letter sent to Memphis Mayor A C Wharton Jr. this month and released Tuesday, Oct. 15.
It came at the end of a four-paragraph letter that began with Wilson saying the city had met the requirements he set out in a May letter critical of city finances.
The May letter brought to the surface concerns state officials had since at least April regarding a wide range of city financial practices. Wilson ordered the city to immediately restore negative balances in some of its accounts. The city did that from its reserves and performed a risk assessment to identify weaknesses in its internal financial controls including debt management.
Wilson described the steps taken as “meaningful.”
“Nevertheless, very substantial challenges remain,” Wilson wrote in the Oct. 7 letter to Wharton. “For example, we understand the city is in the process of restoring its reserve fund balance and reforming its pension plan to address the significant unfunded obligation. I would impress upon the city that it is imperative that it pursue those efforts with dispatch.”
The city’s unfunded liability on its pensions has grown over several years after being more than 100 percent funded prior to the onset of the national recession.
Wharton and his administration estimate fully funding the liability could mean finding $60 million to $80 million in city funding annually that would represent a sea change in budget and financial priorities for the city of Memphis.
It would also likely mean dramatic changes in pension benefits going forward, at least for new city government hires and current city employees who are not yet vested. Municipal union leaders are reviewing the administration’s estimates before the administration takes a plan to the Memphis City Council for review.
Meanwhile, the council has put off until December a vote on setting into motion a sanitation services overhaul that would include a retirement supplement for sanitation workers.
Some council members say it is a pension, a point the Wharton administration vehemently denies. But the council’s decision to delay the vote was made with the belief that the council should not act on that separately from whatever plan the city enacts to fund its pension liability.
Some council members expect that if the city cannot reach a consensus and enact a plan, Wilson will dictate a plan or the Tennessee General Assembly will mandate one – or at least a dollar amount for the fix – when it returns to session in January.