Our View: Job 1: Fix, reduce pensions

It’s time. The Longboat Key Town Commission election and commissioners’ installations are completed. It’s time to get back to work, and as the late Jim Durante used to say, do it “with all due haste.”

And the first order of business: Fix Longboat Key’s pension plans.

This issue — specifically, the town’s unfunded pension liabilities — became an issue as far back as 2002, when the town’s total unfunded pension liabilities jumped from $709,000 to $11 million.

And so began the continuing trajectory of a rising gap between how much Longboat Key taxpayers were promising — and obligated — to pay retired town employees in the future and how much money actually existed to pay.

The hope was that the pension funds’ investment portfolios would produce 8% or more annual gains and cover taxpayers’ obligations. But as we say in business: Hope is not a strategy.

When the unfunded liabilities crossed the $20 million threshold around 2007, former town Commissioner Randy Clair tried to persuade his fellow commissioners to quit digging taxpayers into a deepening hole. His efforts went nowhere.

There’s no point recounting all of the reasons why that was so. That’s another long story. Suffice it to say this current group of commissioners has appeared more motivated than any of the previous commissions in solving the problem. But this commission, too, has been deliberate in releasing the papal smoke through the chimney to let taxpayers know it has a plan. As we’re told, that plan is likely to be presented to firefighters at the end of this month or in early May.

There really isn’t a mystery how to stop the liability from growing. Getting there is the problem — i.e., educating the firefighter and police unions to accept reality. And that reality is they will be required to give up a lot.

They should look around. Indeed, two weeks ago in The Wall Street Journal, one of that paper’s editorial-page editors interviewed the treasurer of Rhode Island, Gina Raimondo. She is credited with single-handedly reforming that state’s fast-collapsing pension system.

One of the comments she made should be implanted in our own town commissioners’ and union chiefs’ minds. As she put it: “This problem will not go away, and I don’t know what people are thinking. By the nature of the problem, it gets bigger and harder the longer you wait.”

Raimondo had another face-reality warning for the union leaders in her state: “Today we’re arguing about whether you get a COLA (cost-of-living adjustment), tomorrow we’ll be arguing about whether you get a pension.”

Indeed, in one Rhode Island city, retired fire and police officers have had their pensions cut in half.
After months of educating everyone involved, Raimondo wooed unions and legislators to do such things as:

• Shift all workers from defined-benefit pensions into hybrid plans, which include a modest annuity and a defined-contribution component.

• Increase the retirement age to 67 from 62 for all workers.

• Suspend cost-of-living adjustments for retirees until the pension system reaches a healthier state.
On Longboat, taxpayers and commissioners know the town’s defined-benefit plans must end. Simple as that.

But commissioners also know the union members won’t be the only ones who must swallow some bitter medicine. There is no way around it: Taxpayers are going to have to make up that $23 million unfunded liability through higher taxes.

The sooner commissioners end this disaster, the better. It’s time.

LONGBOAT’S UNFUNDED
PENSION: LIABILITY
2010: $26,560,726
2009: $26,390,888
2008: $22,766,014
2007: $21,239,605
2006: $15,824,151
2005: $14,284,226
2004: $12,634,660
2003: $10,587,416
2002: $11,927,925
2001: $709,322
2000: $2,418,204
Source: Town of LBK