Retirement and Benefit costs Eating us alive

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According to The Wall Street journal, “All told, state and local governments are on the hook for between $700 billion and $1.5 trillion for retiree health benefits and like Chicago most will soon be unable to afford even their minimum annual payments. Offloading the costs on Uncle Sam will look attractive since retiree health benefits don't enjoy the legal protections that some states have bestowed upon pensions. Stockton, California intends to shed its $400 million unfunded liability for retiree benefits in bankruptcy.”

We have been having budget workshop meetings and only casual mention has been made about our unsustainable and escalating costs--union pensions and benefits. It has been said, but unconfirmed, that the mayor and certain staff have been negotiating with the employee union. Costs have escalated.

Just a few months ago our Finance Department reported that our Unfunded Liabilities were close to $85 million.  Revenue from ad-valorem is estimated at $5.788 million. Estimated revenues from all sources for the new budget year is $29.516 million and that is taking money from Enterprise Funds and our Utility.

Unfunded--(In other words, we DON'T HAVE THE MONEY)
The Employee’s retirement  $ 43,463,807
The Police retirement plan  $ 22,548,900
The Fire retirement plan  $ 22,605,192

Greenacres, a city of similar demographics, always has less of a millage tax imposed on its residents. They have their own police and fire departments. The other difference in Greenacres and Lake Worth is that they went to a defined-contribution plan for their employees in mid 1990. Click here for the explanation and comparison in Defined benefit and Defined contribution.

The retirement system became out-of-control thanks to some commissions of the past that allowed the Unions to get extremely lucrative contracts and city staff letting it all slide by. Politicians don't particularly want to give the Unions a hard time about anything; their political future often depends on it. Their first responsibility is to the taxpayers, not playing politics with Union Reps..

One solution to get out from under the rug is to file bankruptcy. In no way shape or form am I advocating such an idea. However, Chapter 9 bankruptcy is for "municipalities," which refers to cities, towns, taxing authorities, municipal utilities, and other governmental entities. Even city manager, Michael Bornstein, said that our city was "bankrupt." With Chapter 9, Municipalities' ability to re-write collective bargaining agreements can trump state labor protections allowing cities to renegotiate unsustainable pension or other benefits packages negotiated in flush times before the economy collapsed. Go to this link to see all those cities who have filed. Unions now have to consider alternatives if they want cities to be solvent and expect to receive retirement benefits in the future.

Lake Worth  budget discussions have avoided any discussion on the seriousness of these costs and how they are affecting this city and its duty to provide services to the residents.  They have not emphasized the exorbitant costs of benefits and not one commissioner has brought it up other than talking about their own health care enrollment. Perhaps the back-up for last night's meeting will be uploaded today.

UPDATE:  the Back-up documents have now been uploaded.