Officials in Springfield, Massachusetts have taken steps to shore up the city’s severely underfunded municipal employee pension fund.
The city has established a new reserve fund to earmark money for the retirement system and allocated an initial $1 million that was available as a result of surplus cash left when the books were closed 12 months ago on fiscal year 2015.
The Springfield City Council approved both actions as recommended by Mayor Domenic Sarno after new concerns were raised about the city’s pension plan, which is the most under-funded of any municipal retirement system in the state.
City Councilor Tim Allen, who chairs the Finance Committee, highlighted the unfunded pension liability during a series of meetings over the course of the last three weeks. He praised the mayor and members of the administration’s finance team for agreeing to set up the pension reserve fund.
” I had one main goal, which was to get awareness of just how severe the problem is and how we had to start acting accordingly,” said Allen.
Allen initially sought to put the bulk of the city’s surplus cash from the previous fiscal year, roughly $3.2 million, into the pension reserve fund, but said he was pleased with the compromise to set aside $1 million.
” It is a hard issue to fight against because I think everybody realizes it is a severe thing and we have to work at it,” he said.
During the council’s debate over the fiscal 2017 budget proposed by Sarno, the mayor defended what he called an “aggressive” plan to boost annual contributions to the pension system by eight percent in the next fiscal year and by 14 percent in each of the next two fiscal years.
” So, I am not looking to kick the can down the road. We are going to continue to address it,” the mayor vowed.
Sarno said he had to balance higher allocations to the pension fund with the need to maintain, and in some cases, expand core city services.
The Massachusetts Public Employee Retirement Administration Commission approved the city’s latest pension funding schedule, but warned in a letter earlier this year that it had “serious concerns about the long term sustainability of the plan.”
” I have full confidence in our financial team that we are going to continue to aggressively knock this down,” said Sarno.
The city’s pension account is only 27 percent funded. City officials stress that no current retirees’ pension is at risk.
Under current state law, the city has until 2040 to fully-fund the pension system. The funding schedule adopted by the retirement board projects full-funding by 2034.