With available funds to fulfill pension and retirement obligations of Falls Church City and police employees dropping from 80 to 76 percent between July 2009 and last summer, the Falls Church City Council mulled options for closing that gap in the context of severe pressures on its overall City budget during its work session tonight. The Council heard from Connie Rydberg, chair of the City’s Retirement Board, about the impact of “asset losses in the past” linked to the national market nosedive of 2008 on the pension and retirement fund accounts.
In the coming fiscal year, she said, the City will need to ante up $3.3 million, compared to $2.3 million in the current fiscal year, and then that number will rise to $4.2 million the year after that, to $5.1 by Fiscal Year 2014 and $5.6 million in both FY15 and 16, assuming that the City will realize a return on investment averaging at 7.5 percent during that time. Those estimates, she cautioned, are “based on a lot of assumptions that may or may not come true.”
While it was not clear tonight if it would be legal for the City to change the benefit formula for current City and police employees, she did suggest one of her Retirement Board’s recommendations, that changes to the employee contribution requirements be considered. Suggestions of changes to both the benefit formula and employee contributions for future hires took a back seat given the ostensible hiring freeze that is now in effect at City Hall.
Representatives of the Retirement Board present at the meeting with Rydberg (the entire board was present) confirmed that employees would prefer changing the level of the employee contribution to the fund, rather than changing the benefit formula, itself. It was pointed out that while the City’s police are now asked to contribute two percent of the cost of the annual contribution to the fund and other City employees 1.6 percent, in the past during tough times, police were asked to contribute up to seven percent and other City employees five percent.
Raising employee contributions to those levels would be preferable to changing the benefit formula, whether or not doing so would be legal, members of the Retirement Board, including representatives from City employee and police organizations, said. “Our members say they would rather increase employee contributions than reduce benefits,” one said. He suggested the employee obligation be racheted up from its current level to the seven-and-five percent levels “right away, rather than gradually over time.”
Falls Church’s employee payroll chief Richard Parker noted that all jurisdictions are in a similar boat, given the economy, falling short on their in-hand balances of larger retirement and pension obligations by 52 to even 90 percent.
Mayor Nader Baroukh requested that the Retirement Board examine the fiscal consequences of increases of various levels of employee contributions, and to seek legal advice from the City attorney on whether or not changing benefit formulas for existing employees could be made legally. He said the Council should receive a report on the information from the Retirement Board in time to be folded into the Fiscal Year 2012 budget deliberations that will commence in earnest in February.