Mayor to HFD: Decide between job cuts or pension plan underfunding
Mayor Annise Parker, who was not shy during the last mayoral campaign about criticizing what she strongly suggested were unsustainable fiscal policies by her predecessor (and in fact probably won because she convinced voters she was the most fiscally sound candidate in a weak field), has now decided that some unsustainable fiscal policies aren't so bad after all.
According to a report by Chris Moran in today's Chronicle, Mayor Parker hopes to fund police and fire pensions by some $14 million less than the city's obligation to the plans. The administration contends that the savings could also help the city avoid layoffs of hundreds of firefighters at HFD next year.
Moran included some good observations from a local expert on public pensions:
Paying less than the actuarially determined commitment is a recipe for future disaster, warned John Diamond, a public finance expert at the Baker Institute for Public Policy at Rice University who blogs about pensions and other fiscal matters.
"If you don't pay it now, you're just going to have to pay more later. Basically, they are kicking the can down the road so politically they look good," Diamond said.
Parker is trying to honor a commitment to public safety while looking for massive cuts in a $1.9 billion budget, nearly two-thirds of which is spent on the police and fire departments.
Diamond acknowledged the second-year mayor had inherited a problem that's "too hard … for someone to solve without dooming their political careers."
Generally, it seems that Dem leaders are the ones having the most trouble making these hard choices. Republican governors in Wisconsin, Ohio, and New Jersey have seemed willing to tackle these sorts of problems. (UPDATE: Gov. Cuomo seems a refreshing exception).
Ultimately, the state of Texas may have to deal with the public pension problems as municipalities continue to kick the can down the road (as Diamond put it). In the state of California, a strong move is afoot to put significant state/local pension reform before voters (UPDATE: More on this from the WSJ's excellent columnist Daniel Henninger). As underfunded local and state pension obligations become more problematic here, Texas may have to consider similar measures.
UPDATE: See Professor Diamond's most recent post on muni pension problems.
Posted by Kevin Whited @ 03/30/11 10:04 PM | Print |
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