The president of Chattanooga’s Fire and Police Pension Board on Thursday said Mayor Andy Berke and his administration are manufacturing a crisis about the viability of the fund.
Terry Knowles said during a pension board meeting that the dismal pension outlook portrayed by the Berke administration is “nothing more than an accounting scenario.”
“There is not a crisis with our plan today,” Knowles told pension fund board members. “This fund is sustainable.”
In his proposed 2014 budget, Berke proposed a $14.4 million allocation to the pension fund.
But Frank Hamilton, pension fund administrator, told board members that the $14.4 million figure is “puzzling.”
Pension officials said their projection for the city’s contributions was $13.3 million — a $1.1 million difference.
Berke fired back Thursday afternoon.
“It’s sad that the Pension Board would rather play politics by asking me to reduce a contribution to an underfunded pension rather than commit to finding a solution,” Berke said in a statement. “I will not let down our firefighters and police officers because of pension board politics.”
Hamilton said he sent city Chief Financial Officer Daisy Madison information from an actuarial study, by The Segal Co., that shows the annual required contribution is a dollar amount, not a contribution based on percentage of payroll.
“If the city contributes based on a percentage of payroll, but payroll increases are not at the level expected, the city may end up not paying the full amount of the annual required contribution,” the memo states.
In Berke’s proposed budget, the city would give police officers and firefighters a 1.5 percent pay raise rather than 3.25 percent used to calculate the contribution. Pension officials also said the addition of 40 new police officers will increase the number of people paying into the fund.
“If that’s where the $14.4 [million] comes from, then it’s an inflated number,” said Ray Ryan, pension board member.
A new contribution requirement has not been calculated by pension officials, but they estimate the required contribution will actually be lower.
“Give us extra money. … We’re fine with that, but don’t go out there and say it’s required because it’s going up this much. It’s not required,” Knowles said.
Madison said the city has used the same system to calculate city contributions to the fund for at least 20 years.
“Every year, we receive a dollar amount to contribute to the fund based on a projected payroll. We apply the same rate to our budgeted payroll to determine our actual contribution,” she said in a statement. “Over the past five fiscal years, we have contributed $1,968,078 over the annual recommended contribution. Despite our over contribution to the fund, it is still underfunded by $150 million.”
The study conducted by Segal shows that to fully fund the fire and police pension fund within 25 years, the city’s annual contributions will need to triple by 2038.
Berke is in the process of creating a task force to study the pension and hire another company, Public Financial Management Inc., to find ways to limit costs to the city.
Knowles said board members are open to working with the administration, but believes a task force is unnecessary.
“The board understands the administration has concerns about the rising pension costs, and we are more than willing to work with the administration today in an effort to find a shared solution that addresses the city’s concerns. … Unfortunately the mayor made a decision to go a different direction and form a pension review task force that will study our fund and make recommendations on modifications to the pension plan,” Knowles said.
Members of the task force have not been named. However, police and fire chiefs, union representatives, retirees from departments and community leaders are expected to participate. The pension board voted Thursday to send Knowles as its representative.
<em>Contact staff writer Beth Burger at email@example.com or 423-757-6406. Follow her on Twitter at twitter.com/abburger.</em>