The Unfinished Business of Unfunded Liabilities - aka the Mayor's Initiative

Let's be clear about the primary drivers behind the proposed Mayor's Initiative. In city after city, across the nation, we are witnessing the continued squeezing of budgets available for essential municipal and countywide services. The common theme in virtually every community is the increasing share of the current budget that must go to cover previous funding shortfalls in post-employment workforce benefits. Why and how has this been allowed to happen - why are our cities and counties only now being forced to make up for contributions that should have been set aside under previous councils and previous budgets? These are questions we should be asking - but they are conspicuously absent from the conversation.

Inconvenient answers, perhaps? Why else wouldn't we be asking the questions? And now that the issue is being raised, it seems more than coincidental that a majority of local leaders would rather not have a wide-open, free-ranging discussion of the problem. Let's face it folks, this issue represents a systemic failure of epic proportions. The problems are not confined to some one-offs in a few economically devastated or fiscally irresponsible communities. The issue of unfunded and seriously underfunded benefits can be found in the annual reports of virtually every school district, regional agency, city, county and state throughout the country.

The media's role in attempting to frame this as a politically calculated move to strip public employees of their duly entitled pensions does a disservice to the entire conversation and the parties involved. Yes, our public employees should be worried about working for an employer that can't manage to set aside the funding needed to match the promises they have made. That's a problem many of us come to face when we find ourselves working for an outfit that hasn't managed to keep up with its financial commitments. And, that's really the point - that's what we're talking about here.

Just as important as the pension discussion, however, we also need to be talking about its sibling program known as OPEB - "Other Post-Employment Benefits". OPEB benefits are important to the conversation because, unlike pensions (where the majority of required funding contributions have already been made), because with OPEB promises there has been literally nothing set aside for the funding of this benefits. It is the OPEB program, not the pension program, which most clearly frames the debate.

How can a public agency, city or county establish a program offering lifetime, post-employment benefits and not be required to set aside one thin dime towards its funding. The potential for underfunding and/or raiding the system of public employee benefits was clearly envisioned by the authors of the 1937 Act which governs much of our County Employees Retirement Law of 1937.  Keeping in mind the safeguards contained there, something has gone fundamentally wrong with a system which this law was designed to protect.  What are the forces that have caused this once sound program to falter to such a degree?

What we do seems to find is a consistent thread that runs across most every jurisdiction.  We find a budgeting and accounting process that affords elected leaders and current administrations the "financial flexibility" to fulfill campaign promises and fund politically expedient programs without having to address necessary funding needs to support employee retirement programs. It's like having a separate, and infinitely expandable line of credit for those unfunded contributions - you know, the ones that should have been made each year to the retirement fund. The balance on the Card of the Future commitments just gets bigger and bigger and bigger. And yet, guess who will be getting stuck with the tab for those balances? It's not today's Mayor, or today's City Manager, or today's taxpayer. It will be our kids and our grandkids - that's who we'll expect to be picking up the tab for the money that we adults couldn't be expected to put aside over the past twenty years as the Boomer generation enjoyed increasing levels of public services, and granted increasingly attractive retirement formulas and benefits, during the zenith of their earning years.

Why would anyone want their retirement nest egg, effectively their life savings, to be underpinned by nothing more than a super-sized credit card?  Is that the new normal that we should be expecting of our employer - if they are a public entity? 

Aren't these the issues which this conversation is, or should be, all about? Shouldn't we be talking about why the Boomer generation - which has been enjoying all the wonderful services of our dedicated public employees throughout their adult careers - shouldn't have to be bothered with picking up the full burden of their costs?  And, by the same token, shouldn't we be getting some answers from these public employers and their overseers who, together, have so refashioned the original intentions of the 1937 Act - that no one from that era would even recognize it today?

Sustainable communities, like nations, do not just happen. One aim of Informed Majority is to make the connection between community-level financial conditions and the long term health of their communities. Successful communities are the product of active civic engagement and participation of their residents. We hope you will spend the time to explore our site. We welcome your questions. If you would like to learn more or become more involved, please visit our PROJECT UFO to learn more.