PART 1: The debate over how City Hall taxes and spends centers on the old “zero-sum game” paradigm: if Seattle wants to spend another dollar for a good cause, taxpayers need to give another dollar. But what about saving money, too? If city leaders truly care about achieving positive outcomes for those in need, why not find money by saving on other costs and expenses? That’s what we do in our own families, right?
During the City Council debate covering Northeast Seattle (District 4), we asked the two remaining candidates twice, “In addition to tax levies, how would you also SAVE money in order to generate additional dollars for social services?” Disturbingly, neither candidate had specific ideas.
In addition to tax levies, could City Hall find tens of millions of dollars from EXISTING resources to house the homeless, hire policing officers, and fix our roads? YES.
Personnel costs comprise the bulk of any city budget, but the cost of city government retirement benefits has grown dramatically for Seattle. Yet city employee union contracts AND retirement benefits are separated from most discussions of the city budget. The City government has been not only providing the most generous retirement benefits of any government around, but also requiring taxpayers to subsidize it more every year thus far. In 2010, our city government (as the “Employer”, i.e. the taxpayers) contributed $45.2 million to the pension fund of city employees, but then contributed over $90 million in 2014 (according to Table 13 of the Jan 2015 Actuarial Valuation). In other words, the annual contribution from taxpayers to city government employee retirement benefits has doubled in just 5 years. Moreover, the cost to taxpayers just to administer the pension system for city government employees increased from $8.1 million in 2014 to $13.5 million in 2015 (according to the 2016 proposed budget, page 463). While city leaders might argue the taxpayer (“Employer”) contribution will, as a percent of overall city payroll, inch down from 15.7% to 15.2%, our total annual cash contribution to city employees is still twice as high as in 2010.
These dollars could have been used to build housing for the homeless, hire more police officers, and pave our streets. While City leaders should be commended for recently adopting the standard safeguards recommended by accounting experts, they have not actively pursued meaningful savings from retirement benefits by raising their retirement age (city employees can retire as young as 52 years old) and/or starting new government hires with a sustainable 401(k) or other “defined contribution plan.” As much as we criticize our state and federal governments for “not getting anything done,” they have at least reformed their retirement systems for their employees, thereby freeing up money for pressing needs. The annual City Budget meetings are your chance to voice your concerns.
- WHAT: City Budget Meetings
- WHO: You, your neighbors, and groups who want more resources for those who need it the most.
- WHEN: Thurs, Oct 29, Fri, Oct 30, Mon, Nov 2, and Fri, Nov 13, 2015.
- WHERE: your City Hall. For travel directions, CLICK HERE.
Suggested Next Steps:
(1) SAVE money by (a) raising the retirement age AND (b) providing future city government employees with a 401(k) (or similar defined contribution plan) (or other reforms) rather than perpetuating the unsustainable, expensive pension (defined benefit) plan.[UPDATE: According to the Association of Retired Seattle City Employees, the city government is attempting to negotiate with some of the city government unions to offer a different retirement benefit for new employees called a “Cash Balance Pension Plan.” While it could achieve some savings in some years, it is still a “defined benefit” structure that continues to leave taxpayers on the hook to cover any losses and to guarantee a financial return — in this case, a return of 7.5%. To read the arsce.org newsletters, CLICK HERE.]
(2) INVEST the savings into evidence-based programs proven to achieve their positive outcomes (such as high-quality preschool). [Note: Some argue that any savings should be invested to reduce the future unfunded liability in the system, but City Hall recently reduced the city contribution (for 2016), thanks to improvements in the stock market — therefore, it has already shown its willingness to reduce the taxpayer contribution — as long as the liabilities can be paid down in the Year 2043, per the 30-year plan.]
(3) HIRE LEGAL COUNSEL who understands the flexibility local governments have in shaping retirement (and medical) benefits for city employees.
(4) When the City Council selects a NEW FINANCE / BUDGET CHAIR, he or she should have a plan for right-sizing retirement benefits for new employees so that more resources are available for the city’s most vulnerable.
- For financial info on the Seattle City Employees’ Retirement System (SCERS), click these: excerpt from City Budget, SCERS Retirement Handbook, most recent Annual Report, Comprehensive Annual Financial Report (CAFR) page 123, and the Jan 2015 Actuarial Valuation.
- For City laws on the retirement system, click these: Section 4.36 of the Seattle Municipal Code and the most recent Resolution 31617.
- For research on local government retirement reforms, click on these: The Pew Charitable Trusts, National Council of State Legislatures, and San Francisco-based Efficient Government. For the suggested reforms gathering dust at City Hall since 2012, CLICK HERE.
- For the most recent 4-minute City Council discussion on the retirement system, CLICK HERE (and skip ahead to “Minute” 1:01)