VOL. 129 | NO. 5 | Wednesday, January 8, 2014
Wharton Administration Offers First Look at Pension Liability Options
By Bill Dries
Finding $15 million in new revenue each year for the next five fiscal years for the city’s unfunded pension liability will mean “We can’t continue business as usual,” city of Memphis Chief Administrative Officer George Little warned Tuesday, Jan. 7.
And for the first time, the administration of Mayor A C Wharton Jr. outlined some specific options without recommending any of them to the Memphis City Council at this point.
They include the city phasing out medical care coverage for city employees eligible for Medicare, an 85-cent property tax increase or “efficiencies” from a long list of possibilities the city has had from its financial advisor, Public Financial Management.
The PFM list includes such options as a staff reduction for the Memphis Fire Department, a “strategic” reduction in city government’s workforce and “civilianization” in the Memphis Police Department.
The strategic workforce reduction is the largest single item dollar figure at an estimated $40.6 million over five years. Although Little cautioned that the dollar figures at this point are “rough” estimates.
He also said the administration will not be recommending tax hikes.
The city has an unfunded pension liability it estimated Tuesday at $709 million. The city’s annual contribution toward that liability is at $20 million in the current fiscal year that ends June 30.
Wharton has proposed that the city increase that annual payment by about $15 million each fiscal year starting with the one that begins July 1 to bring the annual contribution up to $100 million and maintain that for several decades.
“There’s no other way,” city finance director Brian Collins told council members Tuesday during their executive session.
Wharton and Little have also raised the very real possibility that if the city doesn’t act in a meaningful way on the liability, state leaders in Nashville could mandate even more drastic financial measures.
Little said the administration is still on target to ask the council in February to approve a change in retirement benefits for retired city employees and current city employees who have worked for the city less than 10 years and are considered unvested.
They would be switched to a defined contribution plan similar to a 401k retirement plan instead of the current defined benefits plan. City employees with 10 or more years of service who are vested in the current plan would remain in the plan.