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Shreveport plan to shore up pension fund deserves approval

While the relatively picayunish matter over the recoupment of $53,000 to the city opposed by Mayor Cedric Glover may grab headlines, a much more fundamental transformation of city finance goes on much more quietly and harmoniously even as it is much more desperately needed.

As noted previously in this space, Shreveport faces a ticking time bomb in its employee pension fund (which excludes public safety employees). Barely half funded, at least it’s in better shape than it was a few years ago, courtesy of investment earnings, and is mandated to be fully funded by 2039. But, problematically, under current rules that won’t matter; it’ll be drained completely by 2026.

Thus, the board that oversees the Employees’ Retirement System – City of Shreveport has brought up ideas for city government to consider in trying to erase the gap, which admirably place the emphasis on doing that where it needs to be. One prong is to change the multiplier that allows a city employee to draw full retirement pay (usually based on an average of the last two years’ salary) with as few as 30 years worked (meaning one could retire in their late 40s) to more like a little over 36 years (still meaning a full pension as early as one’s mid-50s), starting with hires for next year. The other increases by a percentage point a year from the current nine percent of salary to fund the pension up to 12 percent by 2017. As a majority on the board are the mayor or his appointees and a City Council member, what the board decides almost certainly will be approved by city government.

The first part creates a more stabilized situation for the future, in limiting payouts at least 10 years away. So it’s the second part that really addresses the crisis now, and both are appropriate to the problem at hand. While there are no specific comparisons of Shreveport employees to area nongovernment employees, statistics measuring total compensation for state employees in general show that, for jobs where comparable tasks are performed, Louisiana state employees (their retirement system being the one Shreveport’s largely is based upon) make 15 percent more than those in the private sector. Other data more specific to city employment confirm this dynamic for Shreveport specifically.

In all, the city planned to pay an average of over $61,000 per employee in 2014 in total compensation (salary and benefits), while the average hourly compensation in the area (including Bossier City and all government workers, which may skew the total slightly higher) of $17.99 an hour (2013 data) plus another almost half of that in benefits (Mar., 2014 data) makes for annual average total compensation (assuming 2,000 hours worked) of all area workers $52,300. While the typical tasks of a city employee likely demand a small degree more of skill and/or education than the typical area private sector employee that could justify higher compensation, it’s clear they enjoy a compensation advantage on average.

Which makes it correct that having future retirees work more years or receiving reduced pension payouts and having present employees contribute more be the answer instead of the alternatives, raising taxes and/or cutting services. Certainly if city government heads in this direction that will demonstrate much more political courage than state legislators, who for years now have whiffed on the similar problem at the state level that also features state employees with a gravy train of compensation relative to those in the private sector, by failing to raise contribution rates, years of service needed, and implementing other sensible fixes.

Perhaps that’s because the problem is starker in a budgetary environment of less flexibility. Regardless, whatever it takes, these are the solutions Shreveport must pursue to work its way out of a problem that if left unchecked would cause a fiscal meltdown along the lines of what happened to somewhat larger Stockton, CA, precisely because of pension issues.

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