Activists Seek Pension Reform to Keep Cincinnati From Becoming Detroit
Cincinnati activists are seeking pension reform to shore up their city’s fiscal situation while Cincinnati and other Ohio municipalities grapple with public-sector union demands similar to those which helped push Detroit into bankruptcy.
Moody’s Investors Service recently downgraded to “negative” the financial outlook for the City of Cincinnati, citing analysts’ “expectation that the city will continue to face budgetary pressure stemming from required pension contributions to the City Retirement System and potential long-term pressure from its exposure to statewide multi-employer cost-sharing pension plans.”
Cincinnati has nearly $900 million in unfunded public pension liabilities, the Cincinnati Enquirer reported in June.
Grassroots volunteers are hoping to prevent Cincinnati from continuing down the road to a Detroit-like implosion. Burr Robinson, spokesman for Cincinnati for Pension Reform, is currently working to place a ballot initiative on the November 2013 ballot to convert pensions for new city employees to a defined benefit plan instead of the current, highly speculative defined contribution system.
“This plan is one where employees would invest in any one of a number of pension investment opportunities that the city would develop,” Robinson told Media Trackers. “They could put in as much as they wanted, the city would match and contribute up to 9 percent of an employee’s annual base compensation.”
“The city would be putting in a certain amount into each employee’s plan, based on what the employee was doing,” Robinson explained.
Unlike defined benefit plans that put municipalities in the red when investments do not meet politicians’ generous promises to union bosses, defined contribution plans put responsibility for retirement savings on public employees themselves.
Consistent with the situation in Detroit, labor unions are already hyperventilating about the possibility of fiscal restraint from Cincinnati taxpayers.
Bentley Davis, the director of the Ohio chapter of AFL-CIO’s Alliance for Retired Americans, called Robinson’s plan “heinous,” warning the Cincinnati Enquirer that pension reform was “nothing short of an attempted destruction of the retirement security for our city’s workers.”
As Detroit’s bankruptcy attests, the “security” of defined benefit pensions is mostly illusory.
In its downgrade announcement, Moody’s pointed to Cincinnati’s reliance “on one-time budgetary solutions and not contributing the full actuarially required contribution to its single-employer pension plan, which indicates a current lack of structural balance.”
Washington Examiner reporter Luke Rosiak recently reported that as of 2011, Cleveland and Cincinnati were among the 19 U.S. cities with a higher ratio of city workers to residents than Detroit had. Excluding teachers and over 4,500 other local government employees, the City of Cleveland had 1 public worker paid an average of $54,929 for every 50 residents.
Not including teachers or 2,118 other county and regional government employees, Rosiak determined that 1 out of every 52 Cincinnati residents drew a taxpayer-funded salary averaging $58,324.
A total of 24 Ohio municipalities, including Scioto County and the City of Mansfield, are in “fiscal emergency” status. Ohio law provides for local government bodies – including public school districts – with budgetary problems to be placed under the state auditor’s supervision if deficits exceed one-sixth of their total budget.
[Editor's note, 08/06/2013: Corrected Mr. Robinson's last name in paragraphs 4, 5, 6, and 9]