City reevaluates pension plans

According to New Haven Mayor John Destefano Jr., pension plans for city employees will run out of money by 2030 at current funding levels.
According to New Haven Mayor John Destefano Jr., pension plans for city employees will run out of money by 2030 at current funding levels. Photo by Alon Harish.

When New Haven Police Department Assistant Chief Ariel Melendez announceid his retirement in January, he was awarded a $124,500 annual salary — an almost $20,000 increase from when he was actually working. When former NHPD Assistant Chief Stephanie Redding retired this past summer, she received a yearly pension of $117,750, also significantly higher than her pay while on the job.

The payouts are a part of the pension system in a city facing a mounting budget gap. Mayor John DeStefano Jr. has declared it is time to establish a “new normal” for New Haven’s pensions.

At a press conference at City Hall on Monday, DeStefano said if current funding levels are continued, pension plans for city employees will run out of money by 2030. Predicting that the city’s budget gap will reach $309 million over the next four years, DeStefano said the city will not face drastic workforce cuts, but must make significant changes to the agreements governing the pensions of its employees like increasing individual contributions to the fund.

“I am not here to proclaim the doom of these plans, and the beneficiaries are not to blame,” DeStefano said at the press conference. “But we have serious issues — we have plans without sufficient assets.”

The proposed changes, however, have yet to be accepted by city employees, and a lawyer for the local police union said the mayor’s public announcement is an unfair way of preempting the union in contract negotiations.

The mayor’s call for change follows a significant decrease in the valuations of the city’s two pension funds, the City Employee Retirement Fund (or CERF), which covers non-public safety employees, and the Policemen’s and Firemen’s (or P&F) Fund. The state funds teachers and school administrators’ pensions.

In a statement distributed at the press conference, DeStefano outlined eight proposed changes to the pension agreements. Most notably, the proposals call for an increase in the contributions employees have to make to their plans. DeStefano said he expects there will be opposition to all of his proposals from some group, but he also expects the bargaining units for city employee unions to approach negotiations with an open mind.

“I know people don’t like change, but we can’t do the same thing over and over again and expect different results,” DeStefano said.

While DeStefano said the pension plans are unsustainable, not every city employee is on board with the mayor’s proposals.

Richard Gudis, an attorney for the police union, said the mayor’s strategy of speaking publicly about his specific proposals in advance of negotiations with unions puts policemen at an unfair disadvantage. Gudis said the reason such proposals should be discussed in private before being aired to the public is that it allows a free exchange of ideas.

“I don’t appreciate starting off bargaining here on the second-floor atrium of City Hall,” Gudis said to reporters after the mayor’s finished his remarks. “What goes on behind the scenes should stay behind the scenes.”

In response to Gudis’ concern, DeStefano stressed the need for transparency in the negotiation process. There are other parties involved, DeStefano said, namely the taxpayers.

For his part, Gudis said he thinks transparency is guaranteed because the elected aldermen must pass the budget that contains the results of all labor negotiations.

Ward 29 Alderman and President of the Board of Aldermen Carl Goldfield said he agrees with DeStefano’s approach, which he said was needed to show the public that the city is not “wildly beating up on its employees.”

Arpad Tolnay, an executive board member of the local 530 union and a New Haven Police Department patrolman, told the News last month that proposed changes to the pension plan are a central concern for the union.

“There are people who have been planning their lives around these pensions, and paying into it their entire careers,” he said. “It’s something that affects us tremendously.”

Tolnay likened the reduction of pensions to the dissolution of Social Security, and maintained that police officers have a right to fight these changes during contract negotiations.

But the mayor stressed the inevitability of making changes to employee pension plans, which are the city’s single largest expenditure. Raising taxes, he said, is no longer a recourse for fixing the city’s structural fiscal problems. The city has raised property taxes in three of the past four fiscal years.

The main metric the city uses to measure the financial stability of both its plans is the funded ratio, which is the value of the assets of the plan — evaluated every two years by an actuarial firm contracted by the city — divided by the city’s liabilities. In 2000, the CERF and P&F plans were funded at 81.2 percent and 82.2 percent, respectively. Since then, those ratios have nearly halved: the CERF plan is funded at 46.5 percent, down from 56.3 percent in 2009, and the P&F plan is funded at 52.1 percent, down from 55.6 percent in 2009.

But despite the pension plans’ decrease in financial stability, some city employees are presently reaping the benefits of the current program.

“When times were good we could afford such generous benefit packages, but times are not good right now,” Goldfield said. “I can’t tell the unions what to do, but I think here’s been some willful blindness on their part.”

The police union will enter contract negotiations later this year, and pensions are only one of the issues that have been raised publicly. The union is holding a “No Confidence” vote against Chief Frank Limon and Assistant Chiefs Thomas Wheeler and Tobin Hensgen on Thursday.

Tolnay said the vote is intended to express the rank and file’s low morale stemming from the pension issue, disagreements about the management of some departments and the delay of new equipment.

The mayor will submit his budget to the Board of Aldermen on Mar. 1.

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