Calling it a “down payment on responsible government in the next 10 years,” At-large D.C. Councilman David Catania introduced legislation this week that would begin to reform the city’s pension system. The federal government now shares the District’s pension obligations, pitching in most of the roughly $500 million in retirement benefits distributed each year. But the city’s contribution is escalating. In 2007, the city paid $46 million in retirement benefits. In 2010, the District paid $71 million and it’s expected to shell out $130 million this fiscal year.
Catania said pension reform is a “common sense strategy for building defensible budgets going forward.” He said there won’t be immediate savings to help close the projected $600 million budget gap in fiscal year 2012. But, said Catania, the District has “played Santa Claus” by providing lucrative collective bargaining agreements without considering the financial burdens for future generations. The Pension Protection and Sustainability Amendment Act of 2011 could lift some of that weight.
Among other things, Catania’s legislation would require an in-depth examination and analysis of the city’s true pension liability and periodic review of estimated disbursements against actual outlays.
The bill also would adjust cost-of-living increases to 50 percent of the Consumer Price Index while setting a 3 percent maximum that could be paid and a 1 percent minimum that would be provided to retired government employees. Beginning next January, COLAs would not be made until an employee has reached full retirement age as defined by the Social Security Administration.
Further, the legislation would disallow overtime, vacation time and bonuses as part of the calculation of benefits and eligibility — a phenomenon known as spiking or pension padding.
“This is measured,” Catania told me Monday. “I put it together with an eye toward what I think we can accomplish.”
Smart move.
Pension reform proposals during the past two years have caused great consternation for elected officials. France’s president was nearly burned at the stake when he raised the retirement age from 60 to 62. New York Mayor Michael Bloomberg proposed last month to move retirement for that city’s workers from 55 to 65. In San Diego, officials changed to a 401(k)-style “defined-contribution plan.” Some states have completely eliminated cost-of-living increases. Social Security recipients haven’t received them for two years.
If past is truly prologue, the most controversial part of Catania’s legislation will be the changes in cost-of-living payments. Some retirees, he noted, have received those payments even as they held down full-time jobs; he cited as an example former Police Chief Charles Ramsey, who receives a pension from D.C. but who holds a similar position in Philadelphia. Meanwhile, current employees haven’t received COLAs.
No one wants to deny retirees benefits they earned. But neither can state and local officials behave irresponsibly, permitting their governments’ service delivery system to decline while they meet lucrative pension obligations. A balance has to be struck. Catania’s legislation begins the conversation about how the District should shape that compromise.
Jonetta Rose Barras’s column appears on Monday and Wednesday. She can be reached at [email protected].
