As proposals to shore up financially troubled police and fire pensions wind through the Minnesota Legislature, others with alternative ideas say they are struggling to be heard.
A coalition of retired police officers and firefighters and at least one current firefighter have been making the rounds at the Capitol trying to promote more aggressive ideas, that include eliminating spiking and reducing benefits.
But they’ve been stymied by a lack of understanding of how business gets done by the Legislature and the fact that they came to the table late in the game. And supporters of a union-backed plan say they’ve already considered a variety of options.
An undeterred Dennis Hoelscher, a retired Hennepin County deputy sheriff heading the informal Coalition of Retired Police and Fire Fighters (CORPF), sent a proposal in late February to the Legislative Commission on Pensions and Retirement and the Public Employees Retirement Association (PERA). The plan offered alternatives to the union-backed bill that aims to remedy the police and fire pension fund’s financial problems.
“We hope our efforts help provide solutions to some of the major contributing factors, more equitable funding and some general taxpayer relief,” the coalition’s plan says.
But it didn’t get any attention because nobody from the coalition showed up to testify at the March 5 meeting when commissioners approved the bill.
Separately, Minneapolis fire Capt. Roger Champagne asked to testify against the bill at a March 12 commission meeting. He was turned away; the agenda was packed and the bill had passed the week before.
The legislative process allows for citizen input, but it’s most effective if done either before the legislative session or at the outset when bills are introduced, said Marcia Avner, who has written a book that gives nonprofit groups advice on lobbying and advocacy.
“There’s always a chance — nothing is ever really dead until the session ends,” Avner said. “But it’s most advantageous to be in the right place at the right time.”
Both Champagne and Hoelscher spoke at a PERA board meeting Thursday, March 14, asking trustees to consider options to get the police and fire fund to a better financial position faster.
“I want to protect the pension,” testified Champagne, who plans to retire at the end of the year. “You can’t really keep putting these costs on cities. It’s the city and the public that I’m worried about.”
But trustees told them there wasn’t anything they could do at this time.
Trustee Paul Bourgeois said it’s necessary to wait and see the results of the current, largely incremental, proposal.
“There’s no perfect bill, because you’re not going to make everybody happy,” Bourgeois said.
Added PERA Trustee Rebecca Otto, also the state auditor: “It’s dangerous to try to change something this late in the game.
“However, I think there will be further discussions down the road.”
The union-backed bill is the result of months of meetings between PERA staff and police and fire unions. Hoelscher’s coalition argues retirees were not part of that discussion.
Dennis Flaherty, executive director of the Minnesota Police and Peace Officers Association and a key player in crafting the bill, said retirees were represented.
“It’s always easy to come in after the hard decisions, after months of meetings and studying the issues, and throw rocks,” Flaherty said. “Nobody from this (coalition) has ever communicated with my office. They know that we have been, for decades, active on police pensions. If (Hoelscher) were concerned, he would certainly have volunteered to be a part of my network.”
The PERA police and fire fund has assets to cover about 78 percent of its liabilities — known as the funded ratio — and has about $1.6 billion in unfunded liabilities. But the more serious problem is that the fund is not taking in enough contributions to meet expected costs. The contribution deficiency amounts to about $64 million a year and, left unchecked, will cause the funded ratio to decline further and unfunded liabilities to increase.
The current proposal calls for a mix of contribution increases and cost decreases, but it will take some time for all of the results to take effect.
Flaherty and other supporters say it’s a “shared sacrifice solution,” so that working members, retirees and taxpayers all share the burden.
“We came to the table with our sleeves rolled up,” John Delmonico, president of the Police Officers Federation of Minneapolis told the pension commission.
The bill includes:
— gradually increasing contributions from employees and taxpayers over the next two years;
— keeping retiree annual cost-of-living increases at 1 percent until the fund’s financial status improves;
— steeper reductions in benefits for those who retire before age 55;
— imposing a maximum benefit limit and tougher vesting requirements on those hired after June 30, 2014.
Keith Carlson, executive director of the Minnesota Inter-County Association, said the increases cities and counties will have to pay will necessitate property tax increases across the state.
However, the burden might be reduced if another bill, which imposes a $5 annual surcharge on homeowners and auto insurance policies, is approved by the Legislature. About half of the $23 million raised annually by the surcharge would go directly toward the public safety pensions’ unfunded liabilities; the remainder would go to cities, counties and the state to help pay their share of contributions.
‘THERE’S SOMETHING WRONG’
Hoelscher said the insurance surcharge proposal is a key sign that more aggressive measures are needed.
“If you have to go to outside the pension to get money, there’s something wrong with your system,” Hoelscher said.
The retiree coalition started drafting its proposal in December after hearing about the union-backed plan. They want something that will get the plan to fully funded faster.
PERA estimates the union-backed bill’s changes, along with revenue from the surcharge, would get the plan to 90 percent funded by 2027.
“The things that they’ve recommended are so minimal,” Hoelscher said. “Why are they afraid to take the reins and do something that’s needed?”
Hoelscher said his group’s proposal is “much more reasonable, more fair, more efficient.” At least 100 people, networking via email, contributed to the plan, he said.
The CORPF proposal calls for increasing employee contributions, while decreasing the amount of money from cities and counties, making the two rates equal.
It also reduces the benefit formula, caps benefits at 80 percent of final average salary for new hires and those with less than 10 years of experience, and restricts what could be included in the pension calculation to base pay. This would prevent officers and firefighters from using overtime during their final years of service to “spike” their pensions, Hoelscher said.
“End of career ballooning in compensations creates a strain on funding pensions and needs to be eliminated,” the coalition’s proposal said.
The coalition proposal also asks for a much bigger financial hit — 12 percent per year compared to the 5 percent in the current proposal — for those who want to retire before age 55.
The current system allows police officers and firefighters to retire with pensions that are too generous, Hoelscher said. And largely because of spiking, pensions at least match, if not exceed, the final average salary for most retirees, Hoelscher said.
A St. Paul firefighter’s average salary at retirement is about $68,628, he said.
“We simply believe that 80 percent of $68,628, or $54,902, for one person, is a very adequate pension, and more so when most of it is paid for by someone else — the employer/taxpayer,” Hoelscher wrote the Pioneer Press.
The only change for current retirees under the coalition’s proposal is to increase the cost-of-living adjustment from the current 1 percent to 1.5 percent.
Mary Vanek, PERA executive director, notes the coalition’s proposal “doesn’t include retirees in the solution” and that it’s difficult to assess the proposal without an actuarial analysis of how it would affect the pension fund.
Larry Martin, executive director of the pension commission, said the CORPF proposal was in the lawmakers’ packets for the March 5 meeting, but even he hadn’t looked at it since nobody was there to testify about it.
LEARNING TO LOBBY
Hoelscher said he’s now trying to find a professional lobbying organization to help him reach out to legislators. Champagne said he will do as the pension commission chair suggested and write a letter laying out his proposal to reduce the benefit formula for police and firefighters, from 3 percent per year to 2.5 percent, as a way to bring down costs.
Missing the first committee hearing isn’t the end of the world, said Avner, now a faculty member in the masters in advocacy and political leadership program at the University of Minnesota-Duluth. Often there are other hearings before the measure is voted on by the full Legislature, she said, and it might be possible to get a legislator to draft an amendment.
“I think it’s important to not be afraid of the process,” Avner said. One of her suggestions: Develop a relationship with a legislator and let that person guide you.
“We don’t make it easy for citizens to be involved at the Capitol,” Crockett said. “The more citizens we can get to show up, the better.”
MaryJo Webster can be reached at 651-228-5507. Follow her at twitter.com/mndatamine.