FAYETTEVILLE -- A proposal to save an ailing pension fund for retired Fayetteville firefighters by handing it over to state control is headed to the City Council this week, with aldermen questioning the motivation behind the proposal and suggesting voters should have a say in the fund's fate.
The council is set to discuss transferring administration of the Fayetteville Firemen's Pension and Relief Fund to the Arkansas Local Police and Fire Retirement System, commonly referred to as LOPFI, during its Tuesday meeting. A final vote could come at that meeting -- if the city approves the transfer, it has to be done by the end of the month in order for benefits to start flowing next January.
The fund's board of trustees said the city must make the move to ensure all members get their benefits for the rest of their lives.
"This is pretty much the best offer we've got to keep this thing together," said Roy Cate, a trustee who's also getting benefits from the fund. He noted members contributed to the fund instead of paying into Social Security, meaning they don't get Social Security benefits.
"We're relying on that little pension," Cate said. "We're just trying to find a hold-on."
But officials during the City Council's Oct. 6 meeting wondered whether the trustees and city were truly working together as well as how much taxpayers would have to pay to cover the change.
"If I was being cynical, I would say they are playing an all-or-nothing game and trying to paint us into a corner on this decision," Alderman Matthew Petty of Ward 2 said of the board of trustees, though he added that providing the benefits is "a moral obligation."
"As it stands, I don't perceive that we're on the same team," Petty said.
Growing benefits
The Fayetteville pension fund stopped accepting new members in 1983, when the state system became the dominant source of retirement benefits for the state's emergency personnel. Fayetteville's fund pays out between $1,311 and $73,302 annually to about 50 retired firefighters or their widows, according to city data.
The fund has about $4 million in the bank, about a third of expected future payouts, Paul Becker, the city's chief financial officer, told the City Council at its most recent meeting. The fund will run out of money, perhaps within a decade, based on its investment performance and the benefits it pays, Little Rock actuary Jody Carreiro has said. The fund's board sees the state system, with its more robust operations and more reliable revenue, as its best hope.
The board's four retiree members voted last month to get the proposal to the City Council over the objections of members Mayor Lioneld Jordan and City Clerk Sondra Smith. The retiree members are elected by the group receiving benefits.
In the past few decades, the board has increased benefits from 50 percent of ending pay to 90 percent, each time with an actuary's approval. The board has never voted to pare benefits in order to prolong its existence despite Smith and Jordan's urging. Board members have said state law doesn't allow it. Board members also have said the city has to keep the benefits flowing at the 90 percent level as the fund's supply of money dwindles, which would mean dipping into the city's general fund.
Kit Williams, city attorney, disagrees on both counts, also citing state law. The questions haven't been tested or resolved in court.
Rep. David Whitaker, D-Fayetteville, introduced a bill in this year's General Assembly session to make it explicitly legal to lower a pension fund's benefits. It passed in the House but failed to clear in the Senate. Fayetteville's board opposed the bill, Williams told the City Council in the most recent meeting.
"I still don't understand why they fought something that would enable them to do something that they're now asking the taxpayers to do," Ward 3 Alderman Justin Tennant said.
Pete Reagan, another trustee on the board, said Thursday that nobody except Williams wants to reduce benefits to retirees. More than 160 pension funds around the state have been absorbed into the state system to preserve those benefits, he said.
"I represent the members of my fund, and I have yet to have one of them come to me and ask me to reduce their benefits to make the fund last longer," Reagan said. "That [bill] gave the cities an out to reduce benefits when they owe the liability in the fund."
The benefit level drew mixed opinions from the City Council.
Ward 1 Alderman Sarah Marsh said the benefits' growth to 90 percent seemed "out of step" with overall wage and benefit growth. Petty said he didn't mind the level, saying the percentage is about the same for today's firefighters. Maybe the board could lower benefits for widows, he said.
Other options
Ward 4 Alderman John La Tour said police and fire personnel put their lives on the line every day of work and deserve support, but he wasn't sure about the state system's involvement. Fayetteville under the agreement would pick up the slack if the system's revenue didn't cover all of the benefits, which could cost hundreds of thousands of dollars, Williams and Becker said.
Carreiro, the actuary, has said the plan wouldn't cost the city anything as long as investment returns and the 0.4 mill Fayetteville residents pay to the fund keep growing at a good pace, which some city officials have said isn't possible.
"I don't like writing blank checks," La Tour said. "If we send this to LOPFI, someone else is going to dictate to our city how much we have to send them, and that's the big unknown."
La Tour instead favored asking Fayetteville voters to increase the millage going to the fund. A 0.2-mill increase, for example, would cost $6 a year for the owner of a $150,000 house and raise a couple hundred thousand dollars for the fund. Becker said raising the millage to the 1-mill maximum would probably be enough to save the fund.
"I like the direct vote because that educates, that doesn't hide the truth," La Tour said. "It seems like you'd have a fairly easy case to make with the public."
The option is also a consideration for the Fayetteville Policemen's Pension and Relief Fund, which is also facing the possibility of eventual failing but has more money than the firemen's fund.
"Three-tenths of a mill for each plan would really go a long way," Eldon Roberts, a retired officer on the police fund board, said during the board's meeting Thursday.
Petty suggested that whatever the City Council decides should also take care of the police pension fund in the same way.
"Any decision we make today is going to strike a precedent," Petty said. "I think if we're going to solve this, we have to solve it for both of them today, at least in theory."
Metro on 10/19/2015