Letters to the Editor: City of F.C. Pension Plans Are Volatile, Expensive & Obsolete

May 29, 2014 10:07 AM14 comments

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Letters to the Editor: May 29 – June 4, 2014

City of F.C. Pension Plans Are Volatile, Expensive & Obsolete

Editor,

I read the Letter to the Editor in last week’s News-Press from Jan Hertzsch who wondered why anyone would object to using $11 million from the water sale to fund pension obligations and came away with some slightly different concerns.

First and foremost is, why are we still offering a traditional pension plan to City employees in this day and age? I doubt there is a more volatile, expensive, and obsolete form of employee benefit available that is single-handedly capable of creating financial havoc for the City. The best managed plans in the world cannot fully protect against low discount rates, market adjustments and the resultant increase in funding obligations and on-going liabilities. I suspect there are other applicable types of retirement benefits, like cash balance or 403(b) plans, which would adequately provide for City employees without the associated uncontrollable elements found in the current plan.

Why not freeze the existing plan and switch to a form of benefit that is more quantifiable and manageable? And while I am not familiar with the specific funding level of the current plan, why place $11 million in a benefit plan where, as I understand it, the funds become irretrievable for any other uses, even if the existing plan ultimately becomes fully or over funded?

That doesn’t seem to make much sense or represent the optimal use of the sale proceeds.

Dave Lauer

Falls Church

 

Falls Church Needs More Than Just Great Schools

Editor,

I don’t know about everyone else in “The Little City,” but I know that my taxes went up almost $1,000 for this year’s assessment. I have gone before council on a couple of occasions recently and complain that giving the school every penny they want without consideration for city infrastructure needs, is unsustainable. And, now we have added on to residential taxes another tax, disguised as the infamous “Stormwater Utility Fee.”

The residents of Falls Church pay a higher tax rate than any other adjacent jurisdiction. Why shouldn’t those who move to this community because of the schools pay for the privilege of sending their children to world-class schools.

Only 25-33 percent of Falls Church households have children in our school system. Yet, the schools account for around 50 percent of the city annual budget. If we can charge households for water that they don’t use, why can’t we charge households for the use of the school system by residents who have children in them? It worked fine when we needed money to pay for upgrades to our stormwater system.

For the 66-75 percent of the households that don’t have children in the schools, our return on our investment has eroded. We need more than just schools to build a sustainable community in “The Little City.” Every developer who proposes a project in Falls Church must give voluntary concessions to the school system. Falls Church needs more than just great schools.

Edwin B. Henderson, II

Falls Church

 

FCNP Editorial Doesn’t Understand Economics

Editor,

The editorial of “Don’t Give $ to the Banks!” in last week’s News-Press contains some incredibly flawed understanding of economics. The notion that “the City’s money can be doubled in value by simply being deployed for federally-matched transportation purposes. That’s not the lame seven percent the retirement fund option presents, but a 100 percent yield!)” justifies its spending by the fact that it’s federally matched. In other words, one of the wealthiest counties in the nation, benefiting heavily from all of the money that flows into this area from the rest of the country, wants to take some more. Maybe given the current economy, now might be a time to show America that one percenters aren’t always selfish?

Second, putting the money into transportation is not investment, it’s spending. Yes, I understand the importance of capital spending, but good luck paying for a pension liability with a repaved road or bike trail. If anybody at the News-Press doesn’t understand this I would invite you to join me at Mad Fox so that you can match my beer investments for me. I would happily accept that 100 percent yield!

Jeff Walyus

Arlington

 


Letters to the Editor may be submitted to letters@fcnp.com or via our online form here. Letters should be limited to 350 words and may be edited for content, clarity and length. To view the FCNP’s letter and submission policy, please click here.

  • andyrankin

    In response to Ed’s comment – does anyone know what percent of households have ever had kids in the schools or ever will have kids in the schools? There are plenty of services that we all pay for that we don’t all use. Most of our neighboring jurisdictions spend as much or more of their overall budget on schools as Falls Church does (and they probably have a lower percentage of households with school kids).

    • Alison Kutchma

      Does anyone know why the teaching profession is not required to be up with the times as private industry in terms of retirement? What I mean is in private industry employees are responsible for their own retirement for the most part financed by the money they earn. Employers often have an employee match contribution to a certain level but by and large an employee is on his own. In this day I do feel that fully funding pension plans for employees is indeed obsolete and expensive. Why can not this be phased out?

      Additionally it seems that people don’t seem to understand the value of this plan and so when talking about teacher salaries — for instance right now FCCPS Superintendent Toni Jones is pushing for more money for teachers. I am all for paying teachers a good salary but I feel as if people do not understand the implications of what she is asking from all of us. Do people know what the loaded rate for these staff really is? So if one were to look at the step chart on the school website for every number one needs to multiply by 1.4 and then again by 1.2 because they only work 10 months a year. That number is the number you compare to your (loaded rate) salary. Do the math.

      • sueFC

        But aren’t her charts comparing salaries across jurisdictions anyway, so FCPS and ACPS would be just as loaded, right?

        • Bill Royce

          Not for at least two data points, according to WABE reports. See http://www.fcps.edu/fs/budget/wabe/2015.pdf at Salary and Benefits Summary pages 44 thru 53

          The cost to us for FCCPS’ health insurance is considerably higher than Arlington for a hypothetical and an average salary.

          What causes the costs to vary and by how much within FCCPS employee population and between jurisdictions, does the difference change each year, all is a mystery.

          I don’t trust averages unless I know what the constituents are and how they are distributed.

          • Alison Kutchma

            I’m with Bill again here too. I am completely unimpressed by the hypothetical “average” wage information hand-outs being disseminated at these budget meetings. Real budget talks have real spread sheets with real information. Someone is obviously working hard but not on pulling together real information we can use. This makes no sense and quite honestly, I think, in the community it serves to raise more questions than it answers.

          • David Horst

            And, FCCPS’ health insurance is considerably lower than Alexandria for the same hypothetical, average salary.

            As to why the differences, I’m sure there will now be any number of insurance agents interested in contacting you to explain it all. Among the mysterious causes for variances in costs: different insurance companies, differing length of times with those companies, different claims histories, different plans, different staff sizes, different staff demographics, different regions, different medical costs in those regions, etc.

        • Alison Kutchma

          I learn something from Bill every day. I just read his comment below. But that said: still do the math. I know that people say that some go find a supplemental job in the summer to earn more but many people out here earn that amount and do not have the summers off to go get a supplemental job or benefits like that; retirement taken care of; snow days; all the major holidays. I’m just saying we need to consider all of this when we say we don’t pay them “enough.” They work very hard and long days – no question there but it’s important to do the math so we understand what we are talking about.

          • sueFC

            Agreed on the info provided. Although typically budget data is presented in multiple ways. I.e. Down to the nitty gritty, every single line for some consumers and rolled up to show the high/low points to others. Seems like your concern is whether or not the nitty gritty version exists (would be shocking if not, I agree!!) but more importantly whether we taxpayers are entitled to it. I don’t know the answer to that and how school districts work, how other school districts provide budget data to folks, and if ours is off-base or not. I hope you get access to what you are looking for though.

            As for teacher salary in general, I think everyone understands the benefits (snow days and summers off, healthcare, pension, etc)?

          • Alison Kutchma

            Well I will say that the budget information that was no longer available on the website is now available for all to see. It is line by line but the detail in each line is not expanded upon so there is a lot of money in each line for which I would like an explanation.

            I am very confused about the process here because these meetings are just not as I would run them. I would have everyone looking at an excel spreadsheet with this years proposed budget next to this years operating budget for comparison (next to ’14,’13 as well) so we can see change over time. I would also have data about performance on our key mission which is educating students and see how the budget effort ties to that performance. In other words — groups of students that are not doing as well — there would be money tied to that effort to change that outcome. We have A LOT of money going for programs with no data to show how it impacts those groups of students in a meaningful way. That’s off mission as far as I’m concerned when you have groups of students that need educating and staff that need to be hired — it makes no sense and we have elected a school board to take the time to look into these things and be stewards of our money and the mission our community expects and that is educating our kids and getting them ready for the next level. When you have staff that are frustrated and feel like we are going off course it’s time to re-evaluate. I pay my teachers to spend time with students teaching and when I hear that they are being encouraged to tweet, personally — in my opinion they are off mission. Can we get back to our core duties please.

            I saw the school board meeting (available on line) from October ’14 and there was a presentation on the middle years program. I heard no questions about cost or projected cost. It was a power point presentation, I believe complete with music. Where’s the spreadsheet showing cost that goes with that program? I am not buying a time share here — we’re educating our children and someone needs to oversee where time is being spent and for what.

      • FallsChurchCitizen

        I agree with the underlying point here, Alison. If you look at the schools’ budget from last year, the largest year-over-year increase wasn’t for technology, student supplies or even salaries…it was benefits.

        I guess my question is: how much control over teacher pension plans does the City have vs. how much is controlled/directed at the state level in Richmond?

        • Alison Kutchma

          I wish I knew the answer to that and I actually don’t. However, the benefits are real and we pay for them. I do not know why we can not initiate a new program for all new hires and phase out this program we can not longer afford. The steel industry did that although I don’t think ‘phase out’ is the appropriate term to describe what happened there. The point is we need to do something because the current projectory is not sustainable. That said if we can’t do anything about it then we at least need to operate from a point of full understanding about what we are talking about when the Superintendent’s number one priority is to pay our teachers more. Because as the salaries go up the benefits go up as a function of that by 1.4 (for ten months of work.)

        • David Horst

          Answer: City: Zero control, School system: Zero control: Richmond: 100% control – Virginia Retirement System.

  • David

    While I agree with the general notion of Edwin’s letter–that the rubberstamp generally given to the school district is ridiculous–the notion that taxpayers with kids in schools should only pay these taxes is nuts. That’s not how taxation works in this country, or Virginia. If Edwin makes use of the police department, or public works, or some other city department or service, should he get a separate bill for it?

    There are a lot of good arguments against the schools’ runaway spending over the past few years. Edwin’s is simplistic and unhelpful.

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