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LETTER: Analyzing the Audit: More Bad News

No more band aids -- the town's fiscal problems need permanent fixes.

 

To the Editor:

The recently completed Town of Hamden Audit revealed the following:

  1. The town's fund balance is $558,000, 0.3 percent of its $185 million budget and far below the recommended 5 percent level.
  2. The pension fund continues to be an item of concern.
  3. The town allocated a $21 million contribution in this year's budget, but that line item was only funded with $6.5 million.

Here is the town’s response:

  1. The pension problem is the administration's #1 issue
  2. Last year, fixing the medical insurance deficit was the #1 issue
  3. One thing to consider is Pension Obligation Bonds …it can't be kicked down the road.
  4. A $20 million contribution would translate into a four to five mill tax increase … but it's an option

Here’s the problem as I see it:

  1. The medical issue isn’t going away; as retirees grow older this expense can only go up. I anticipate further deficits in this account.
  2. Pension Obligation Bonds will kick the problem down the road. It is the quintessential panacea for any administration incapable of dealing with the problem. This will most certainly be the choice of the Jackson Administration.
  3. The pension and medical benefits as they exist today cannot be supported without crushing the taxpayer

I would differ with the Adminstration when it comes to numbering priorities. The pension deficit is by far significantly greater than the medical deficit, yet the priority last year was the medical deficit leaving the pension deficit to continue to grow.

Notice that the administration poses no solutions that require the fundamental restructuring of both the pension and medical benefits. Simply throwing more money at the problem only temporarily defers the pending catastrophe to future taxpayers and administrations.

I understand that most folks can’t appreciate the magnitude of the problem. However, I believe, the taxpaying public ought to know and this is my way of informing them so that they can see how this will eventually play out.

The solutions offered by the administration only place a band aid on the problem and do not go far enough to implement a cure. In other words, the patient can never find relief, but only linger in a constant state of misery holding on in desperation with the hope that in the future a cure will be found. This is totally unacceptable. We the people deserve better!

The solution is to first fix the pension and medical benefits so that they more appropriately reflect what most American’s already have as a benefit package. This may mean going back to the social security system and Medicare and embracing 401K plans as a viable pension alternative.

Once we reform benefits, then let’s talk about a funding alternative to meet our existing obligations. If we agree to more money now, without the corresponding reforms to the broken system, we will never see any meaningful changes. This can only translate to an ever increasing tax burden. 

Ron Gambardella

Marty January 04, 2012 at 04:21 AM
Going back to Social Security and a 401K is the solution. Pensions are no longer viable. I know they have come to expect them but it's time to wake up. I'm truly afraid of what is to come this year as far as tax increases go.
Charles Baltayan January 04, 2012 at 01:16 PM
The current administration is too indebted to labor for votes to properly consider doing right and terminating the pension plan. Jackson, during the past Mayoral Debates, cited legal reasons not to consider doing so and we are all too aware from the ice rink debacle how good his legal counsel has been. There is no reason why the pension plan can not be terminated and the sooner it is, the better the employees, and the taxpayers, will fare.
Charles Baltayan January 04, 2012 at 01:36 PM
More food for thought: Anyone find it strange that the Finance Director and the Pension Fund Administrator are both leaving??? (not to mention un-named personal agendas cited for longtime Board Member Hul resignation) So much for the Jackson statement that 'Government can no longer do business as it has in the past'!
Thomas Alegi January 04, 2012 at 01:40 PM
Why has this all come about? To find an answer to a problem like this, one has to find out what caused the problem in the first place, if not, we are ging to make the same mistake over again.
George Levinson January 05, 2012 at 04:43 PM
The only answer to the pension issue is to reduce the obligation. As it now stands, the pension fund is essentially pay-as-you-go. This year's $20 Million payout will more than double over the next 20 years. By that time, health care and pension alone will consume about half our tax dollars. It simply isn't fair to expect the taxpayers to support town workers to that level. Pension reform is hard but necessary. My number one recommendation is to change the collection age to 65. Those who choose to collect early must suffer an actuarial reduction in benefit. This is just like private pensions (for the lucky few who still get a defined benefit) and Social Security. Sorry folks, those who thought they would collect in their 40s and 50s should give back or risk losing everything.
Charles Baltayan January 05, 2012 at 04:54 PM
George: Your premises are correct but your solution helps but doesn't solve the problem for either the employees or the taxpayer. To coin your phrase: it just kicks the can down the road. The pension plan must be terminated and the remaining funds distributed as earned and defined in the plan. Those funds can be placed in 401K's (or other vehicles) and town workers can be in the 'real world' like everybody else.
Ron Gambardella January 05, 2012 at 07:19 PM
Here is the problem. Many employees have spent the majority of their working lives as town employees. Many are already seniors. For these employees, they simply do not have an option other than what was promised. You need at least 40 quarters to qualify for social security and Medicare. That amounts to 10 years on the social security system. We simply cannot abandon employees without providing a safety net. George's proposal will go a long way to help solve the problem. Beyond that, pension and benefit reform is absolutely necessary for the survival of the town. The current administration has simply not be honest with the taxpaying public.
Charles Baltayan January 05, 2012 at 07:30 PM
The audits have noted the pension problem at least since 2007. The employees have an option and they have contributed to Social Security as well as have a refundable stake in the pension plan. As we have all lost in our 401K's and the stock market in general, the pension fund, and hence their shares, have not performed optimally. No one is saying that the town employees are not good workers but neither should they receive better treatment than the taxpayer. Terminating the pension as soon as possible will be the best for both the pension plan shareholder and the taxpayer/Town.
George Levinson January 05, 2012 at 09:10 PM
Terminating the plan and priming the 401K pump is a reasonable idea. However, when the remaining funds,are distributed everyone would lose a lot. Short of dissolving the plan altogether, changing the retirement age would go a long way toward making the plan solvent, without big tax increases or bonding. The big problem is not those already retired. It is the 600 plus workers yet to retire who could be collecting for the next 50 years, and at a much higher benefit. People in their 40s and 50s can still work and make a living (even if they leave the employ of the town) and could have their full earned benefit when they retire at 65. Those who choose to collect early must have their benefit severly reduced. Private pensions and Social Security typically go down 5-7% for each year early. This is a terrible situation. Hamden's plan is 26% funded. Other towns are much better, some well over 100%. Hamden has not passed those underfunded dollars to the taxpayers. For many years town administrations have chosen, perhaps badly, to have more employees with higher pay and funded more expensive construction projects than we could afford. The only viable choice now it to undo some of the previous commitments. Too late to cancel the Police station. Nobody wants to cut positions or salaries. What remains is the benefits themselves. Those must be moderated or eliminated.
Charles Baltayan January 05, 2012 at 09:23 PM
It is a misconception that 'everyone would lose a lot'. The plan is what it is. Those that paid the most in get the most back. The pension plan performed as one's 401K does- it was expected to perform better and didn't. It is not the taxpayers fault or responsibility. Hamden has chosen to build expensive projects in disadvantaged times. It should terminate the plan before there is nothing left to distribute, stop increasing expenses and stop spending money it doesn't have.
Angela January 06, 2012 at 03:06 PM
How many administrations do we have to go through that claim they need a tax increase to help fund our underfunded pension plan and it is STILL UNDERFUNDED. For the past several Democratic admininstrations we have heard this BULL and NOTHING is ever done, but they spend money we don't have on their "pet projects". When are people in this town going to wake up and vote for people who have the expertise to get us out of this hole. They do not know how to correct this situatiion, but they do know how to give out raises in a time we are all tightening our belt. How nice for them!!!!

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