Letter: Pension proposal could have negative impact
To the Editor:
Trumbull First Selectman Tim Herbst recently convened a Charter Revision Commission to make “corrections” to a charter his administration revised only two years ago. What stands out is that municipal charters are typically altered but once a generation.
A public hearing seeking comments on the commission’s draft was held earlier this week. The commission now has the option to make changes based on citizen input. Town Council may alter the commission’s document. With its approval, the revisions become a part of our November ballot.
Many articles were proposed for revision. The one of greatest interest is the most complex, least understood, yet the one that could produce the strongest negative impact on Trumbull’s taxpayers. The first selectman seeks to mandate that Trumbull fund its town and police pensions at 100 percent of the Actuarially Recommended Contribution (ARC) level each year, with no opt-out during a weak economy nor when pension investments earn less than their target amount.
We owe our retirees every penny we have promised them. Unfortunately, Trumbull has a history of underfunding both plans: The town’s is funded at a mere 28 percent of the required amount, the police’s at a more robust, but still unacceptable, 65 percent.
The point that deserves more consideration than the commission has given it is that pension funds do not always meet their return objective. For example, in the recent down economy, the town plan lost $2.5 million during the 2007-08 fiscal year, and another $4.2 million the next.
Had the proposed mandate been in effect, already stressed taxpayers would have had to make up these losses (plus losses in the police fund). The first selectman could have invoked a combination of three alternatives: cutting town and/or school services, bonding the losses, or increasing our tax rate. None is attractive.
The commission holds up two communities as models for Trumbull. Greenwich has the mandate the first selectman proposes, Newtown does not, but for years, has had the “discipline” to fully fund. Both communities are interesting, neither is relevant.
Greenwich has the largest Grand List in the state — seven times that of Trumbull — plus a tax rate one-third of ours. They have a single, fully-funded pension plan with assets of $400 million for all town employees. Its investments lost $35 million during the weak economy. The town made up the losses from available funds.
Newtown is less well resourced, but their discipline keeps their plan fully funded.
The writer proposes an alternative charter article that increases pension funding well beyond current practice to fully fund both sooner, yet without endangering services or forcing taxpayers to the brink. Both pensions should be funded at not less than 75 percent of ARC annually, regardless the economy. In addition, the first selectman should supplement the mandated amount to fund as close to 100 percent as he deems appropriate, leading by example rather than mandate.
This will create greater flexibility, while infusing the discipline needed to maintain our commitment to our retirees.