Higher costs forces Cincinnati to raise employee contributions and reduce pension and retiree health care benefits (excerpts)
June 9, 2009 — Cincinnati Enquirer
Distressed by worsening financial and personnel woes within the Cincinnati Retirement System, City Council members said Tuesday they have the votes to make sweeping changes.
Those changes could increase health payments for most retired city workers, raise the retirement age and force city employees to contribute more to their pensions.
The emergence of a long-sought council majority on the volatile issue came as City Manager Milton Dohoney delivered a bleak message to members - that the city's contribution to its troubled pension plan would have to increase by $100 million next year to avoid deepening its already massive financial hole.
With no realistic way to meet that demand, council members said Tuesday it gives a new urgency to fundamentally restructure the city's retirement system in order to safeguard retirees' pensions and protect the taxpayers who help underwrite the fund.
"We're on the road to insolvency," said Councilman Jeff Berding. "If we reach that point, by law we would have to increase taxes. So anything we do to strengthen the retirement system helps retirees, current employees and the public."
The council's plan to move ahead with the changes sets up a contentious showdown with retirees, who repeatedly jam council chambers whenever any possible change to their current benefits is debated. Last November, dozens of retirees sharply protested the proposed shift in health benefits, a show of force that contributed to the council's lengthy stalemate.
Tuesday's developments came as Dohoney told council members in a memo that, based on consultants' latest assessment of the pension plan's financial health, the city in 2010 will be asked to contribute $125.5 million - five times this year's $25 million - to keep pace with projected benefits and other expenses.
That 2010 figure represents nearly 81 percent of the city's payroll. If, however, the city continues to contribute only 17 percent of payroll, as it currently does, the retirement fund's unfunded liability - the gap between assets and expenses - would double over the next five years from $914 million to $1.8 billion, Dohoney said.
