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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