The simmering animosity between Mayor Mitch Landrieu’s administration and New Orleans firefighters over the funding of the firefighters pension system is likely to break into open hostility soon, with city officials set to move forward with a series of legal challenges and legislative changes aimed at curtailing benefits they say are beyond the means of the nearly broke retirement fund.
The moves are essentially a counterstrike against the pension system, which restarted lawsuits against the city for past underfunding after the breakdown of talks brokered by the New Orleans Business Council earlier this month.
“We have been in conversations with the firefighters pension board for years, particularly over the last few months, to ensure the sustainability and longevity of the pension fund,” Landrieu spokesman Brad Howard said in an emailed statement late Thursday. “However, the board representatives have consistently refused to compromise, even declining two solid paths forward that were supported by the administration and the business community during the final meeting of the Fire Pension Task Force. Therefore, the administration intends to pursue both legislative and legal actions to resolve this issue as quickly and as comprehensively as possible.”
Administration officials did not say exactly what measures they will seek to implement, but their proposals will almost certainly involve legal challenges asking the courts to toss out the method the pension system now uses to calculate benefits, which the administration says are more generous than state law allows. Another court fight would likely target a system that allows firefighters to collect their pensions plus an additional disability benefit at the same time.
It’s less certain how the administration will proceed in the Legislature, though measures aimed at slowing the pace at which firefighters accrue retirement benefits and increasing the amount they must contribute into the system from their paychecks are likely. Any such legislative moves could lead to a fierce fight in Baton Rouge.
The dispute between the firefighters and the city is long-running and wide-ranging.
Firefighters have argued that the city owes $176 million in legal judgments for its failures over many years both to properly fund the retirement system and to give required raises to firefighters. The administration has pointed to the dismal performance of the pension fund’s investments, which largely wiped out its accounts, and has argued that — despite its precarious financial position — the system has been far too generous distributing benefits and granting cost-of-living adjustments.
The task force that wrapped up its work earlier this month was unable to get a consensus agreement on any of four options presented by consultants. While two of those options represented a blend of items sought by the city and the firefighters, the other two were heavily weighted toward the positions of the firefighters in one case and the administration in the other.
Firefighters rejected all but the plan tilted toward their position, largely because the other proposals meant letting the city off the hook for some or all of the money involved in the court judgments against it.
City Council President Stacy Head, who has been highly critical of the way the pension system has been run, said she believes the administration will ask state lawmakers to enact the option that represented the city’s view. That plan calls for the city to increase its contributions by about $4.1 million next year, compared with $6 million under the compromise proposals or $29 million under the firefighters’ option.
“We’re certainly going to try to make some changes if we can in Baton Rouge,” Head said.
Lawsuits are likely over two issues related to how the fund calculates and distributes benefits.
The first involves conflicting interpretations of the state law that says how long it takes firefighters to qualify for a full pension. For years, the pension board has used an interpretation that allows them to retire after 30 years. The city says the law calls for benefits to accrue more slowly and for a full pension to be granted only after 33 years of service.
The future pensions of about 248 active firefighters, roughly 45 percent of the department’s strength, would be affected by which interpretation of the law is upheld. If the city’s interpretation is backed by the courts or legislators, those firefighters would see their future benefits decrease by up to 15 percent, depending on how many years they have already worked in the department.
A thornier issue is what would happen to firefighters who have already retired and whose benefits are based on the pension system’s past interpretation. City officials have not directly addressed that question.
The city could also file a court challenge to the pension system’s practice of allowing retired firefighters to collect disability benefits of up to $30,000 a year for 10 years from the city on top of their retirement pensions. Other systems deduct the amount received in disability payments from firefighters’ pensions.
Whether lawmakers go along with the city’s plans remains to be seen.
Before the legislative session opened, state Rep. Walt Leger III and state Sen. Ed Murray, both New Orleans Democrats, filed “placeholder” bills that could be amended to make changes to the pension system.
Leger said he hasn’t had time to review any specific proposals on changing the system, as most of the early days of this year’s session have been consumed with ways to solve the $1.6 billion shortfall in the state budget.
“I do expect we will move a piece of legislation on the issue. What that entails at this time is something that deserves some more discussion and thought,” Leger said.
Follow Jeff Adelson on Twitter, @jadelson.