Negotiations fail; Firefighter pension fight headed to court, Baton Rouge

Negotiations between New Orleans firefighters and city officials have failed, leaving a protracted legal battle and jockeying in the state Legislature as the likely arenas for their ongoing dispute over firefighter retirement benefits.

A working group established by Mayor Mitch Landrieu, which served as the vehicle for the negotiations, met for the last time Monday night in front of a City Hall auditorium packed with angry firefighters who say the city is trying to renege on promises they were made when they signed up for a dangerous job.

Firefighters and city officials on in the working group were miles apart on what the basic elements of a recovery plan would include.

The meeting did make clear just how dangerously underfunded the retirement system is, however.

Previous estimates pegged the system’s funding level at about 20 percent, meaning it had enough money to cover about one-fifth of the pension promises it has made to firefighters and retirees. The latest figures, however, say that number is much lower. For practical purposes, the system is nearly zero percent funded, according to consultants hired to assess the fund and mediate negotiations.

The fund had only about $61 million in assets as of January, and almost none of that money is available to pay pension benefits because nearly all of it is tied to retirement savings accounts held by individual retirees who can cash out at anytime.

If they all called in their deposits, the fund would go bankrupt overnight.

The city and the firefighters can no longer afford to put off a funding solution, said Vijay Kapoor, who has served as the mediator during the negotiations.

The firefighters say that the system would not be so poorly funded if Landrieu had made all of the city’s required payments into the fund since coming into office in 2010. They advocated Monday for a plan that would use a proposed 5 mill property tax increase to fund the sale of bonds, the proceeds of which could be used to fund the system and pay firefighters for two decades worth of back pay they are due after a court judgment in their favor. In exchange, they would agree to some minor changes to make the pension fund less generous.

The city, backed for the most part by business leaders who also sat on the working group board, wants more serious benefit changes and to levy only a 2 mill tax increase. That would create some breathing room, allowing for the potential payment of some of the back pay.

The city says that the pension’s poor health is due to terrible investments and overly generous benefits. The city’s failure to pay its full contributions in recent years is responsible for only a tiny fraction of the fund’s problems, according to the Landrieu administration.

To date, no one has done an actuarial study to assess what the fund would look like if the city had paid in some $90 million over the last several years as it was originally supposed to.

With the two sides so far apart, the path forward will probably be decided through a combination of court fights and legislative changes made in Baton Rouge, because the fund’s particulars are controlled by state statute.

The question is whether the pension fund will survive long enough for those battles to be resolved.