KC's pension plans even worse off than thought
The Kansas City Star
Kansas City taxpayers got some sobering news last week about the city’s four pension systems.
They were underfunded by $559 million as of May 1, 2011, according to handouts that City Manager Troy Schulte gave to the City Council finance committee.
However, after that meeting, I reviewed all of the new annual pension plan statements that were released late last month.
These latest reports reveal even more alarming figures.
The actual unfunded liabilities for the systems had ballooned to $611 million as of May 1, 2012. That was up 9.3 percent in just one year.
Put another way, the city expected to have only 77.5 percent of the money needed to cover anticipated retirement benefits.
That’s far below the 96 percent-and-above level most of the pension plans were funded a decade ago. And it’s under the 80 percent figure, which is commonly accepted as the lowest level of a well-financed retirement system.
Some of the negative news about the city’s plans:
Over the last two years, almost all of have grown weaker.
The funded portion of the firefighters’ retirement plan dropped from 84 percent in 2010 to 78.5 percent in 2012.
The funded liabilities for the police officers’ system fell from 79 percent to 75.5 percent, while the much smaller plan for civilian police employees fell from 77 percent to 75.6 percent.
In the only positive sign, funded liabilities for the large system covering mostly blue-collar workers went up from 75 percent to 79.1 percent.
The rising U.S. stock market isn’t saving Kansas City’s pensions.
The Dow Jones Industrial Average went up 18.5 percent between April of 2010 and April of 2012.
Yet as noted above, three of the city’s systems — all of which have large investments in stocks — got financially weaker and their unfunded liabilities rose by tens of millions of dollars over that two-year stretch.
That’s right: Despite a rising stock market, the pension plans continued suffering. They are far, far away from recovering the stock losses suffered in the 2008-2009 decline, among other woes.
Payouts to retirees are jumping.
That’s partly because employees leaving City Hall in recent years were better paid than their predecessors. So their pensions are bigger.
Two years ago the average retired firefighter was getting $35,760 annually. By 2012 that figure had jumped to $39,012, or 9 percent higher.
The average annual pension for retired police officers had gone from $36,117 to $38,665, or 7 percent higher.
And the average for blue-collar workers went from $23,364 to $24,672, or 5.6 percent higher.
Sum all these figures up, and it’s very clear that Kansas City taxpayers are going to be shelling out far more in the future than they should for public pensions unless changes are made.
Others who should be concerned are the 3,400 retired and disabled employees already receiving monthly defined benefit pay checks, along with hundreds of other beneficiaries such as widows. In addition, thousands of current employees expect to get retirement benefits when they leave City Hall.
So far, though, nothing has altered the trajectory of the pension systems.
In late 2011, after months of meetings, a special committee mostly made up of business leaders recommended boosting employees’ contributions and reducing their annual cost of living adjustments, among other ideas.
Mayor Sly James and the council endorsed the panel’s report as part of a basic framework for the future.
Now the issue is in Schulte’s lap. This year he has held more than a dozen closed-door meetings with union representatives on possible reforms.
But as Schulte told finance committee chair Jan Marcason last week, no proposal had been adopted yet by all the factions. Marcason firmly said she wanted to see something more concrete by next week’s finance committee meeting.
Keeping the pressure on is a good thing, especially as the city’s unfunded pension liabilities keep growing.
To reach Yael T. Abouhalkah, call 816-234-4887 or email firstname.lastname@example.org. He blogs at voices.kansascity.com and appears on “Ruckus” at 7 tonight on KCPT.