Potential Pension Savings No Cure for Current Budget Crisis
By Carl Wagenfohr
CLEARWATER - In an effort to reduce the burden of employee pension plan contributions that are projected to grow to nearly 30-percent of annual salary for the next several years, the City Council heard an analysis of several "tweaks" to pension benefits during their Monday worksession.
Although those "tweaks" could add up to a potential annual cost reduction of nearly $5.5-million, they would provide no relief in the city's ongoing struggle with its 2009/10 budget.
The presentation by the city's actuary, Donna White of Price Waterhouse Coopers, was in response to questions raised by the City Council during their discussion of Pension Plan costs in May.
Nearly $3-million could be saved annually by eliminating the 'free' survivor benefit, which provides the spouse of a deceased city retiree with 100-percent of his/her retirement income for 5 years, then 50-percent for the remainder of the spouse's life. White called the provision of spousal benefits without a reduction in the employee's pension benefit "atypical."
Adjusting retirement eligibility could also provide substantial savings. Currently, the city's retirement plan allows hazardous duty employees (police and fire/rescue) to retire with 20 years of service unlimited by age, or at age 55 with 10 years of service. Non-hazardous duty employees can retire at 30 years of service unlimited by age, 20 years of service at age 55 and 10 years of service at age 65.
According to White, eliminating the hazardous duty eligibility at 20 years and non-hazardous duty at 30 years would save the city more than $2-million in annual pension contributions.
Placing a service limit on benefit calculations would save the city nearly $500-thousand per year according to White. The current pension benefit uses a multiplier of 2.75-percent times the number of years of service to calculate a pension, allowing an employee to earn 100-percent of his/her pre-retirement income with 36.36 years of service. Imposing a maximum of 30 years service on the benefit calculation would limit an employee's retirement benefit to 82.5-percent of pre-retirement income.
Limiting overtime earnings to 300 hours per year for the purpose of benefit calculation would save the city an additional $50-thousand per year according to White.
While the potential savings of $5.5-million could go a long way toward balancing the city's 2009/10 budget, the requirement for a public referendum on pension plan changes and the need to submit any changes to collective bargaining with the city's several unions would impose at least a 2-year delay before those savings could be realized in a budget.
Meanwhile, the City Council continues to grapple with next year's budget. Under discussion at tonight's meeting will be a proposal by Council member Paul Gibson to limit next year's millage rate to an increase of 3-percent, or 4.8672 mills versus the tentative rate of 5.155 mills set by the Council earlier this year.
That would result in a further reduction of nearly $2.5-million in 2009/10 property tax revenue according to a staff report. That same report described resulting service cuts that would close all but the Main Library, shutter recreation centers and eliminate an additional 64 city employees.
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