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Pension reform: Proposal to keep pension fund solvent
CINCINNATI (Jeff Hirsh) -- It's an 860 million dollar elephant in the room threatening to trample everything in sight, including the police officers and firefighters who keep you safe, unless something is done.
Cincinnati Mayor John Cranley proposes a fix Tuesday for the city's huge shortfall in its pension fund. Pension stories can be complicated, so let me simplify things.
In one hand is a cola with a Coke label. In the other hand is a cola with a Pepsi label. Keep that word cola in mind because it's one of the keys to solving this massive problem.
Thousands of current city workers and retirees are covered by the Cincinnati pension fund. But that fund has an 860-million dollar shortfall.
Mayor John Cranley said, "If we were forced to pay that off in a short period of time it would mean massive layoffs to police, fire, street paving, garbage collection. You think we have budget problems now. If we don't address this and the credit markets downgrade our debt into junk bonds not only will the cost of borrowing go up, but we would not be able to deliver basic services. It would be a true crisis situation."
Now, remember the cola. Well in pension-ease, cola is not Coke and Pepsi. Cola stands for Cost Of Living Adjustment, C-O-L-A.
Cranley wants to reduce the annual COLA (cost of living adjustment) for city retirees, increase the percentage of health care costs which retirees pay, and take up to 100 million dollars from the health care trust fund and use that to help reduce the pension shortfall. Cranley says city council, including a few years ago when he was there, has not made the necessary painful decisions to shore up the pension fund.
Under the mayor's proposal, city council would agree in advance to a certain range of cuts to negotiate with city unions and retirees. In return for those cuts, the pension fund would stay solvent. He wants a federal judge to okay the whole deal making it an order that some future city council could not get around.
"So our goal this year is to say we have taken enormous political courage to get this where it needs to be politically and in court, and we can show them the numbers. If we can get even half these changes we're going to be in the right place," Cranley said.
Cranley says he has the votes on city council. Now he needs to get he AFSCME Union, which has sued the city over benefit cuts, to agree to negotiate with the federal judge pushing things along to get a deal.
If the pension fund can be fixed everyone might want to forget the cola and pop open a beer.
Cincinnati is the only city in Ohio with its own pension fund. Every other community is in the state retirement system. Cincinnati's fund dates to 1931 and pre-dates social security. However, the Cincinnati fund does not include police officers and firefighters who have their own statewide retirement plans.
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For the video, click HERE