Opinion: Altering Firefighter Pension Benefits Demands Careful Analysis and Justification

NEW ORLEANS — From the Bureau of Governmental Research:

On April 24, BGR released a new report, Altering New Orleans Firefighter Pension Benefits Demands Careful Analysis and Justification. It was prompted by BGR’s concerns about state legislation to reverse pension benefit cuts from a landmark 2016 legal settlement to shore up the firefighters’ beleaguered pension fund. Although the sponsor of House Bills 33 and 32 has shelved the bills, these concerns remain highly relevant because proponents of the pension changes plan to try again, possibly in next year’s legislative session. For that reason, BGR is releasing this report to inform the public and policymakers about problems with the withdrawn proposal that any future proposal should address. Those problems include: 

  • Concerns about the City Council, which must budget for the City’s pension contributions, not having a say in whether to change pension benefits.
  • Insufficient evidence to support proponents’ contention that the pension benefit cuts have caused significant recruiting and retention problems. 
  • Risk of further weakening the pension fund’s poor financial health. 
  • An unknown increase in the public’s already substantial pension costs. 
  • Risk of unjustified pension changes eroding public trust, especially after voters approved a 2.5-mill property tax to help fund the settlement. 

BGR supports appropriately funding core City services, including fire protection. Employees who carry out those essential responsibilities should have fair and competitive compensation. At the same time, the firefighters’ pension system is in poor financial condition and imposes substantial costs on taxpayers. Thus, it is important for policymakers to strike a balance that is both effective from a staffing standpoint and affordable to the public. This requires that any changes to the pension benefit structure are carefully justified. This will require rigorous study to identify any problem to be solved and the long-term impacts of any proposed solution.

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BGR recommends that, before seeking changes to firefighter pension benefits in New Orleans, the three parties to the 2016 settlement, or cooperative endeavor agreement (CEA) – the mayor, the firefighters’ union and the pension fund – should: 

  • Seek City Council review of proposed changes to the pension benefit structure and approval of any necessary amendments to the CEA. 
  • Facilitate an independent and professional study of the New Orleans Fire Department’s hiring, retention and compensation. The study should analyze the extent to which pension benefits are a cause of any problems in these areas. 
  • Accompany the compensation study with an analysis of the department’s personnel needs and ideal staffing level. 
  • Facilitate a professional actuarial analysis of all costs of any future proposed benefit increases. 
  • Carefully justify any proposals to amend the pension benefit structure that require an exception to the 80% funding threshold established in the CEA. 

Read the online summary.

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