Pen­sion predica­ment

Kansas City faces ris­ing costs

The Kansas City Star (Sunday) - - OPINION -

Kansas City’s rich pen­sion pack­ages are be­com­ing an in­creas­ingly ex­pen­sive bur­den on tax­pay­ers, a re­al­ity that elected of­fi­cials must work to fix soon.

Act­ing City Man­ager Troy Schulte can ad­vance the dis­cus­sions by pre­sent­ing to the City Coun­cil a good way to move fu­ture em­ploy­ees into a con­tri­bu­tion re­tire­ment pro­gram sim­i­lar to a 401(k), now preva­lent in the pri­vate sec­tor.

The shift for fu­ture em­ploy­ees would not af­fect thou­sands of cur­rent and past em­ploy­ees in the sep­a­rate po­lice, fire and city staff pen­sion sys­tems.

Those prom­ises must be up­held. How­ever, of­fi­cial city es­ti­mates pro­vided in re­sponse to a Star query show how quickly costs have es­ca­lated for the pen­sion sys­tems, partly be­cause em­ploy­ees are now bet­ter paid.

In the 2004-05 bud­get, the an­nual pub­lic pen­sion con­tri­bu­tion was $39 mil­lion.

But for the cur­rent 2009-10 bud­get, the tax­pay­ers’ share has jumped to $55 mil­lion.

It takes sig­nif­i­cant pub­lic funds to sup­port pen­sions that of­fer long­time em­ploy­ees up to 70 per­cent of their fi­nal av­er­age pay — and up to 80 per­cent of pay for fire­fight­ers. That’s a much bet­ter pen­sion than in much of the pri­vate sec­tor.

His­tor­i­cally, the trade-off has been lower-pay­ing jobs for bet­ter re­tire­ment. But with im­prove­ments in salaries, the ar­gu­ment for rich pen­sions loses some va­lid­ity.

Schulte said that — while many states and cities have gained at­ten­tion for their trou­bled pro­grams — Kansas City’s “are not hor­ri­bly un­der­funded” and are in fairly good health with the re­cent stock mar­ket come­back.

To­day’s smaller work force will trim the an­nual pub­lic pen­sion con­tri­bu­tion to $54 mil­lion in the 2010-11 bud­get.

Any change in re­tire­ment ben­e­fits won’t be easy, given re­cent pay freezes and re­duced work forces. The fire­fight­ers union strongly op­poses any change in pen­sions, and few big cities have blazed the trail in mov­ing to 401(k)-style re­tire­ment ac­counts for new em­ploy­ees.

Two years ago, Mayor Mark Funkhouser called for ex­plor­ing pen­sion changes, but he failed to fol­low through. The city ought to of­fer a fair and rea­son­able re­tire­ment sav­ings pro­gram for its work­ers while re­duc­ing the fu­ture fi­nan­cial bur­den on tax­pay­ers.

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