New Orleans firefighters and officials with Mayor Mitch Landrieu’s administration will get together Monday night for the last of three public meetings aimed at finding a mutually acceptable solution to the Fire Department’s woefully underfunded pension system.
But it remains unclear whether the sides will be able to announce an agreement by their self-imposed deadline.
“We hope that either at the meeting or shortly thereafter we do reach consensus,” said businessman Paul Flower, who serves as the nonvoting chairman of the group and a representative of the Business Council of New Orleans and the River Region.
The city and the firefighters have been battling over the pension system for years, both in the political arena and in the courts. Those fights inspired the creation of the task force, which includes community members as well as representatives of the city and the firefighters. The group has been working on the many issues involved since the fall.
All sides “have shown a dedication and a commitment to developing a comprehensive solution. Some progress has been made,” said Coleman Ridley, managing director of the Business Council.
If there’s no agreement, the two sides could once again slug it out in Baton Rouge during the legislative session that starts next week. Barebones “placeholder” bills dealing with the pension system have been filed that could be turned into weapons by either side to push their own version of how the fund should operate.
It now costs the city about $59 million a year to pay expenses associated with firefighter pensions, about $4.5 million more than it spends running the department.
Much of the cost is beyond the control of anyone at the table. The city will spend more than $17 million this year paying for the retirement of firefighters who were enrolled in a previous version of the pension system that was never properly funded. That means the city must pay the cost of those pensions as it goes, rather than being able to draw on investments and the income they would generate.
The liability from the “old fund” will decrease over time as its enrollees die, but the fund is expected to still be a cost on the city’s books into the 2040s.
Another $17 million a year goes toward paying off $150 million in bonds that were issued in 2000 and intended to help provide resources for the pension system. The proceeds from those bonds already have been spent, but the city remains on the hook for the payments through 2030.
Meanwhile, the system itself has enough money to pay only 5 percent of the pension costs for current and retired firefighters. That’s far below other similar systems. The state Firefighters Retirement System, for example, is more than 76 percent funded.
The low funding ratio in the New Orleans system has been exacerbated in recent years as many of its investments have dropped in value, leaving the system now basically using all the money it takes in each year simply to pay current retirement benefits without being able to invest much money.
The Landrieu administration has cited poor investment decisions in the past and an overly generous benefit structure as the main culprits responsible for the perilous state of the pension system.
At the same time, firefighters have said the city has not kept up with the payments it is required to make to the system each year.
There have been some attempts in recent years to deal with those issues, including changing the pension board’s composition and operations and gradually ramping up the contributions required of active firefighters.
Other changes to the structure of the system will likely be part of any proposals put forward Monday, though a host of related issues are expected to be in play, as well.
New Orleans firefighters who retire on disability, which means they can no longer perform the duties of a firefighter, are now able to claim supplemental benefits of up to $30,000 a year for 10 years from the city on top of the normal retirement benefits they receive from the pension fund. Other systems with similar benefits subtract the amount firefighters receive in disability from the amount they collect from the pension system, reducing the overall cost to the system, and the city is expected to seek a change in the local rules.
In addition, there are disagreements over whether the pension board has properly interpreted the state law that governs how quickly firefighters accrue their retirement benefits.
On the other side, firefighters want any deal on the pension fund also to settle issues related to a 1990s lawsuit that found the city had not paid firefighters required raises over the years. The firefighters won that court fight, but there are now disagreements over what that means for the city’s obligations to the pension system, since bringing the firefighters up to the correct salaries means they are due higher pension payments.
Another question is what the city intends to do about a potential 5-mill increase in a special property tax dedicated to fire prevention. The administration lobbied hard last year at the Legislature to gain permission to move forward with that measure and a similar 5-mill tax increase for police, but Landrieu said recently that he is not sure if the city will put the two tax proposals before the voters.
Follow Jeff Adelson on Twitter, @jadelson.