A Reality for the Next Mayor
Like it or not, Shreveport’s next mayor will inherit three grossly underfunded pension plans with outstanding funding liabilities exceeding two hundred ($200,000,000) million dollars. Much like long deferred water and sewage infrastructure projects, the pension plan elephant is in the room and should not be ignored.
The City pension plan covers 1342 active and 958 retired employees. Employees contribute 9% of pay and the City chips in 13.15% of payroll; the current vesting for the plan is 10 years. The unfunded liability is $185 million and the plan’s current value is $213.4 million. The current budget contribution by the City to the unfunded liability is $6 million.
Presently Shreveport policemen and firemen are in the state pension plan. The State’s unfunded liability for the fireman’s plan is $512 million and the unfunded liability in the policemen’s plan is $860 million. There are 517 firemen, and 565 policemen, respectively, in the state plans that vest in 12 years.
Shreveport has two closed pension plans – – one for the retired fireman and one for the retired policemen. There are 398 fireman in the closed plan that has an unfunded liability of $11 million. The plan’s current value is $12.88 million. The current budget contribution to the plan by the City is $1.2 million.
There are 200 policemen in the closed plan that has an unfunded liability of $5.5 million. The plan’s current value is $12.4 million. The current budget contribution to the plan by the City is $1.27 million. The good news is that the unfunded liability on the closed plans decrease over time as there are no new participants in those plans.
To it’s credit, the Glover administration has actively reviewed all three plans, and the plan’s board may make recommendations for delayed vesting in the City’s plan. Reportedly, the City’s pension plan is very generous in it’s vesting schedules and payments as compared to other similar municipalities. Any changes would only affect new employees; current plan members would be “grandfathered” under the current plan provisions.
Dale Sibley, Shreveport’s Chef Administrative Officer, advises that the unfunded liabilities are projections of the future amounts needed to cover all benefits that must be paid out over the life of the plan for all beneficiaries. According to Sibley, current contributions reduce the growth of the unfounded liabilities which increase each time new beneficiaries become vested. Sibley notes that a real reduction in the unfunded liability will require much more dollars in terms of annual contributions and/or return on plan investments to become fully funded.
For what it is worth, very few municipal/state pension plans are fully funded, and many private sector plans have staggering unfunded liabilities. A city’s overall fiscal health depends in part on pension plan liabilities; open discussion of this issue along with other fiscal matters such as a financial audit of all city departments is reflective of good, progressive government. For Shreveport, it’s time, – – in fact many believe it’s past time.