Hard reality of our challenges can’t be ignored
City of Memphis longterm finances are not sustainable, and the system as constructed is not honest to employees, retirees or taxpayers. That’s a sad mathematical fact, and our longterm challenges are far more insidious than the annual skirmishes over the annual operating budget.
Every year, the city’s actuaries provide an ARC (Annual Required Contribution — not Suggested Contribution) to accurately fund the future costs of pensions and retiree health care. The city has underfunded the pension plan alone by more than $50 million each of the last three years — and $70 million in this year’s budget. The city also shorted the health care ARC by $85 million in this year’s budget.
Together, the pension and health care unfunded liability is $1.2 billion — twice as large as our annual operating budget. Paying the ARC in the 2014 budget would have meant an additional $1.48 on the tax rate — a 43 percent increase over the $3.40 tax rate just approved.
As I believe our tax rate is too high and is making us less competitive, I believe we need to make reasonable changes to our benefits structure, such as eliminate 25-years-andout for all employees not vested or move to a defined contribution (401(k) model) plan and tier retiree health care based on years of service.
This approach would secure our future and end the annual ritual of rearranging the deck chairs on the Titanic and stopgap budgets with a focus on who gets the credit. We should engage in true reform of our broken business model, so that we have an honest government to be proud of.
However, to drive real change, Mayor A C Wharton needs to stop studying and start leading. We have all been at City Hall for years and own this challenge. Dr. Martin Luther King Jr. said that a genuine leader is not a searcher of consensus, but a molder of consensus. Due to the construction of our government laid out in the charter, any big change in city government must be led by the mayor — molded through consensus with the council.
I stand ready to absorb any political fallout to support these efforts and ensure that we create an honest government that meets the current and future needs of taxpayers, retirees and our city employees. We will never be a great city and region unless we get the basics of budgeting correct. Kemp Conrad represents Super District 9, Position 1, on the Memphis City Council.