The New Orleans firefighters pension system is an outlier among similar plans, historically offering more generous benefits and requiring lower employee contributions than other systems in the Southeast, consultants hired to analyze the financially ailing system said Monday.
The fund is expected to cost the city more than $60 million next year, a cost necessary to cover years of underfunding by the city, coupled with poor investments and generous benefits and terms for the firefighters who are in the system.
The consultants, hired to aid a task force put together by Mayor Mitch Landrieu to come up with ways to fix the system, said action is needed because the system now has less than 20 percent of the assets on hand that it would need to pay out its obligations.
“Of funds of a similar size, this fund is in the worst financial shape of any we’ve seen,” said consultant Vijay Kapoor. “The fund is not going to get better on its own. It will need all parties here to work together.”
Monday’s presentations during a meeting in the City Council chamber were still largely scene-setting for the complicated job facing the task force: getting representatives of the City Council, the Landrieu administration and the firefighters on board with a package of changes to the state laws governing the plan that could put it on the right path. Given the animosity such changes often have generated in the past, it remains to be seen whether such a plan can be developed by the time the Legislature meets in April.
New Orleans Business Council leader Paul Flower, who heads the task force, said the group has a relatively restricted set of options, particularly in light of work that already has been done to overhaul the system.
“The options are somewhat limited,” he said.
“I think what’s important is to focus on what has an immediate impact and where’s the control,” said Melanie Walker, one of the consultants.
That would mean looking primarily at three “levers”: increasing employee contributions, reducing or eliminating cost-of-living adjustments and changing the way the fund invests its money, she said.
But some of those areas already have been altered in recent years. Changes to state law have meant higher employee contributions, though they still remain below what employees in other similar plans pay. The system also has cut cost-of-living adjustments.
“The bottom line is that we’ve already exercised some of those levers,” said Louis Robein, an attorney for the system. “It’s not going to solve the fundamental problem that the city has not been paying the actuarially required contributions.”
No specific proposals were floated during Monday’s meeting, though some city officials took particular interest in various aspects of the presentation.
Council President Stacy Head focused in on financially strapped plans that were combined with other systems. Head has shown interest in that idea in the past, though it is expected to face opposition from the firefighters and could require hefty up-front payments by the city to convince another pension system to take on such a responsibility.
Chief Administrative Officer Andy Kopplin expressed interest in whether firefighter retirement systems elsewhere are bound by state law in the same way the New Orleans system is, suggesting a desire for greater local control.
The makeup of the retirement system’s board, which has been at the center of skirmishes in the past, won praise from the consultants, though Walker noted there is little financial expertise on the board.
But even as the task force tries to find some consensus, tensions at times were clear during the meeting.
Early in the proceedings, firefighters union President Nick Felton made a comment that wasn’t audible to the audience but apparently could be heard by others at the dais. It drew a sharp rebuke from Head.
“Watch it, Nick,” Head said. “Your attempts at whispering are about as good as your subtlety in other ways.”