ELECTION 2011, THE ISSUES: The Pension Fund

It's underfunded, everyone agrees. Here's what the candidates want to do about it.

It's nothing new, and it's not going away any time soon.

Hamden's pension fund needs an injection of cash, but how that will happen is up for debate. And it was last week at the Hamden Chamber of Commerce's mayoral debate.

"The pension is about dollars, and it is funded at about 26 percent," Democratic incumbent Mayor Scott Jackson said, "one of the lowest percentage in the state.

"Does that mean we are going bankrupt? No," he said.

In 2000, the fund was funded at about 70 percent, he said, but two years later that dropped to 50 percent. And since then, it's been even touger to keep the cash flowing into the account because of the economic downturn, he said.

"The economy has an impact, as well as what we decide to put into it," he said.

Newly hired town employees no longer are part of the town's pension plan, but instead participate in a state plan. And town officials are looking into instituting a 401K option for new hires, Jackson said.

They also are looking into pension obligation bonds, a contraversial move that would allow the town to bond the money it needs to bring the pension fund up to recommended funding levels.

"We need an influx of cash into the fund to generate additional income," Jackson said. "We are going to have to have a broad community conversation about how to fill this hole."

"In some ways, it's a ticking time bomb," said Republican challenger Matthew Corcoran. "This is one of the few problems in government that can only be solved with money."

The town's auditors recommended that $19 million be put into the fund this year, but only $3 million was allocated for it, Corcoran said. 

"We simply need to make a commitment to putting more money in it," he said.

But pension obligation bonds aren't the way to do that, he said.

"I am opposed to borrowing on taxpayer money," he said. "You could end up losing money that way."

He's also opposed to the proposed revisions to the Town Charter that allow officials to go that route, he said. 

"I'm opposed to giving the town authority for non-capital bonding," he said.

Independent mayoral candidate Charles Baltayan agreed. The problem is that the pension benefits of the past were more than the town could afford, he said.

"Many in town feel that the pensions town employees get don't mirror what the rest of us have, and that's just not right," he said. "Most corporations don't even offer pensions."

The town needs to terminate its pension program, Baltayan said. 

"It's not a good thng to do to people who put their trust in us to take care of them after they work for us," he said. "But we just can't afford it and we have to find a creative way of dealing with it."

It's not legally possible to terminate town pensions, Jackson said.

"If we could, we would have," he said. 

It's also not realistic to think the town could have afforded to put $19 million into the fund this year, Jackson said.

"But if we're bound to put money into it," Baltayan said, "why haven't we?"

"Nineteen million dollars is several mills of taxes," Jackson said. "There's no easy answer to this and it's going to take a lot of hard work."

John P. Flanagan November 03, 2011 at 11:00 AM
Mr. Corcoran seems like a nice fellow. But, as a previous Mayor from his Party was fond of saying, "He hasn't done his homework." The Town already has the authority to pass a pension bond. There is no differentiation between capital and non-capital bonds. The Town bonds an expense. There is no difference in obligation to pay. This problem, including the bonding idea, is nothing new. It's been discussed since the second of Mayor Clayman's three terms. One of the biggest differences Carl Amento and I had on municipal finance when i decided to run against him in 2003 was his penchant for bonding everything, not dealing with current costs and pushing the tax increases down the road. He won. I lost. And, the Town is still dealing with the same problem which Mayor Henrici, partially, dealt with by switching where the fund is administered but not the costs. Out of sight and out of mind! Unfortunately, those running for office are still discussing the same solutions. Pension obligation bonds are a very stupid idea. But, the Council already has the authority to pass one. And, past Councils' have, wisely, never even allowed the proposal to get past discussion stage let alone on any agenda. Now, they need the courage to deal with the problem. All switrching to a State fund or bonding do is get the payments out of sight. It doesn't make it go away. Tax dollars still pay for it. So, it's time to pay the bill with current tax dollars.
Professive Mom November 03, 2011 at 01:13 PM
Mr. Flanagan, I have tried to do my homework - but I see nowhere in the existing Hamden Charter where the council is allowed to pass a bond for non-capital expenses. Unless this is implied in section 18-2, kindly outline the section for us. Also, we are in agreement on the risk of borrowing and I'm not in favor of adding to the 10% capital debt cap we are very close to. But wouldn't you agree, if the pension is not bonded, with no obvious budget items to cut that drastically (or maybe you have some ideas), don't taxpayers face a frightening prediction for a massive tax increase? Is that a wise move in a town with one of the highest tax burdens in the highest taxed state - in this economic climate where people are losing their jobs and their homes? What are the other options?
Charles Baltayan November 03, 2011 at 01:39 PM
Terminating the pension plan is not a popular option, certainly not with employees that are members of the plan. There is a clear provision in the plan (Hamden Personnel Rules, 34WW, SS31.45) (B) Termination: "The town by action of its Legislative Council, may terminate the plan for any reason at any time. In case of termination of the plan, the funds shall be used for the exclusive benefit of members..." The current Mayor, whose dismal track record regarding legal actions like the landfill and skating rink, states that Federal Law trumps local. ERISA, which generally does not speak to government issues, will not have a bearing if the parties make an agreement. The issue is preserving the rights of our current and past employees and getting them the most for their retirement dollars. The members of the plan are smart enough to realize that there is more liklihood of greater benefit if you cut the losses earlier and split up the plan before there is nothing left (at $19Million/yr with $66Million remaining, that's only 3+years). The termination clause has a complex method of distributing assets which members of the plan can invest at their choosing. The Town/Taxpayers can not afford more debt and are taxes are too high already due to the ill-advised spending of past administrations. We must negotiate an agreement that benefits the people and our employees. By negotiating we avoid needless litigation expense that can be shared by the people and the employees!
Professive Mom November 03, 2011 at 02:10 PM
I agree that the town pension should be terminated and not just moved 'out of sight' - but we must do this in a way that is fair to current retirees and those in line to collect. The town pension is financially unsustainable and very few in the private sector (who pay for the public employees!) get any kind of guaranteed pension. There is a growing resentment toward some of us paying for things not available to everyone. I agree with Mr Baltayan - terminate the pension in the fairest and most equitable way possible for our employees. And just in case the new charter passes with the allowable 4% borrowing to fund the unsustainable pension (think bank bailouts) - DO NOT VOTE for council members who would vote to bond the pension in order to avoid termination - in my estimate - they are anyone receiving or who will receive a public pension: Al Gorman, Carol Noble, Jack Kennelly, Gab Lupo, Austin Cesare, Judy Kozak nothing personal folks - but there has been no history of recusing oneself when there has been a clear conflict of interest.
George Levinson November 03, 2011 at 02:21 PM
Bonding the pension liability is absurd; Just institutionalizes the can-kicking. Having no pension commitment to new employees is not a solution either. First of all, new employees going to the equally-overcommitted state plan simply means we all still pay, just out of another pocket. Secondly, it will probably be 60 years until the last covered employee is gone, so the town's commitment must be remediated now. For years, pension commitments have been the ultimate vehicle for politicians to kick the can down the road. For example, last year the mayor got some one-year pay concesssions from the police. In exchange he agreed to giving 3 years earlier retirement in exchange for unused sick time. That will probably mean in excess of 150K for every officer down the road. The only solution I see is for the town to dissolve the pension plan. Every employee's share would be converted to a cash 401K account which can go forward and be personally managed by the individuals. The percentage paid to each recipient would be negotiated and funded by an extra assessment on the taxpayers, perhaps spread over several years. It would be a painful burden on the town for a while, kind of like a sewer tax, but then it would be over forever. In the future the town could make negotiated contributions to the 401K accounts but those would be strickly pay-as-you-go; no big, unmanageable future commitments. It' time to deal with this problem directly and solve it once and for all!
Professive Mom November 03, 2011 at 04:01 PM
Mr. Levinson I like it - dissolve the pension (but over a 3-5 year period no?) and convert it all to a 401K plan. As a taxpayer, I am willing to pay for a matching 401K plan for our public employees. Spread the pain - take it down in small steps and be fair to those who have served our town. Mr. Baltayan - since I am deciding who to vote for - what is your position on this?
Charles Baltayan November 03, 2011 at 05:02 PM
All: Terminating the pension plan means only an end to the pension plan in it's current form. The proceeds of the distribution would be given to the members and they would then get to decide whether they would want a 401K or another vehicle of their choosing. The Town should only offer options not make decisions that the member should be entitled to make on their own. The numbers would have to be worked out but with $66 million to split up amongst the 1200+ members, the Town and the workers should be fine. The sooner it gets terminated, the better for all as the $66Mil. figure is the last available and dwindles daily.
Tony November 04, 2011 at 04:06 AM
Excuse me, the candidates you discuss, such as Gorman, Cesare and Noble don't get a pension from the town. They are teachers - and they pay into the state teacher retirement fund. And, to be very clear because I took the time to call and ask him myself before deciding to vote for him, Mayor Jackson is only EXPLORING PENSION OBLIGATION BONDS AS ONE POSSIBLE OPTION it is not his recommended solution, just something that can be studied and considered.
Professive Mom November 04, 2011 at 10:44 AM
professive mom said ' DO NOT VOTE for council members who would vote to bond the pension in order to avoid termination - in my estimate - they are anyone receiving or who will receive a public pension'. I think anyone receiving a public pension has a conflict of interest on this issue - whether or not it is from the town of Hamden.
John P. Flanagan November 04, 2011 at 11:25 AM
And so at last it comes out. Teachers fund their own retirement but 'progressive mom" just doesn't like any public employees getting pensions, Sorry Luv, slavery and involuntary servitude was outlawed by Constituional Amendments just after the Civil War. Oh excuse me. In your case that would probably be viewed as War between the States. And all this was negotiated into contracts or enforced by State statute! And, those are pensions are funded either, like the teachers by contributing 6 to 9% of their salaries over the past 30 to 40 years and being ineligible foe Social Security and Medicare; or, by employees taking less in salaries than they should have been paid. And, why? To keep your taxes down. Want it changed? Negotiate it or change the law! And, as far as section 18-2 of the Charter is concerned, "Progressive Mom", again you're someone who simply hasn't done the homework. This was discussed, studied, investigated, argued and debated back between 1999 & 2001. And, the Council determined it has the power to bond anything they want simply by terming it a bondable expense and/or a capital project. Wisely, we on the Council, back then, decided not to bond the pension fund. End of Story! That dog not only won't hunt. It's been dead for 10 years. And the Charter? Most current Council people don't know where to find the copy they're supposed to have or know what's in it. Let alone refer to it.
Charles Baltayan November 04, 2011 at 12:58 PM
Mr. Flanagan: A sad commentary on the Legislative Council and their relation to any charter. Progressive Mom's point, which is well taken and in no way refers to slavery, only seeks to take the obligation for public employee retirement issues out of the hands of the taxpayer as the corporate world around them has done. It does not deny a fair wage for good work. The pension shoud be terminated for all public employees if it relies on the taxpayer to support it on any level: local, state or federal.
Professive Mom November 04, 2011 at 01:49 PM
Mr. Flanagan, I don't like your tone and don't call me 'Luv'. Are you saying working for low wages and no pension constitutes 'slavery'? Well then there are a lot of people ready for emancipation! I am in favor of fair pay, good health benefits, and a matching 401K package for public workers. That is more than many people get. The guaranteed pension is fiscally unsustainable, often abused (like workers inflating their last 3 years, or double dipping by working as consultants, etc. etc.), used as political bait for union endorsement, and unfair to taxpayers in the private sector who work hard and receive no such benefits. It is well documented that public workers are not paid less than their private sector counterparts - they are paid more. As far as the council - they know full well that they are now at the 10% ceiling for any future debt. This is why new buildings such as the fire station need to be built under a lease agreement - another mistake. There is no room for additional borrowing for any 'project' - capital or non-capital before it must go to referendum. The credit card is maxed out - and the council wants a new one worth $8 million dollars each year.
John P. Flanagan November 07, 2011 at 03:18 PM
First, you set the tone by pontificating without knowledge. Second, i shall refer to anyone in that category, especially who hides behind a nom de plume in a political discussion, any way I wish. Third, the 10% limitation applies to percentage of the yearly budget and not a day longer. Fourth, whether the limit has been approached, or reached, can depend on the organization of the payment schedule. Fifth, there is absolutely no category such as "non-capital" bonds. However, I notice that you don't address that. Apparently, homework is not your strong suit. Non-capital, with relation to finance, is a term which does not exist in economics or finance. It may be a lovely innovative and even original term, invented by a lawyer, possibly referring to other than "money, goods, property, contracts or obligations owned, or possessed, by individuals, groups, corporations or government bodies"., But it's a term which doesn't exist within the restrictions placed on the bonding power of government. That it is included within the added 60 pages of verbiage cluttering the proposed new charter is rather sad. It's not the only fantasy used for that document. However, it will be the first item that will be used to attempt to stop a bonding issue. And, it won't work. Also, last time a Mayor tried to sell and lease back out own property during the Amento years, it was stopped. It's a charade which attempts to flim-flam the public. Rather like the phrase non-capital.


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