The City of Omaha is on track to pay off its deficit in the fire and police pension in two decades — half the time originally estimated, Mayor Jean Stothert said Wednesday.
Stothert held a press conference to highlight a report commissioned by the fire and police pension board that estimates the public safety pension system will be solvent in about 21 years.
“It’s good for the taxpayers, for police and fire employees and for our bond rating,” Stothert said.
Bond raters want to see a plan to pay off a shortfall within 30 years, Stothert said, and this puts the public safety pension within that range.
Finance Director Steve Curtiss said that before the pension changes negotiated a few years ago, the fund was projected to run out of money in about two decades. Now it’s projected to be solvent in the same amount of time.
“We are very pleased,” Curtiss said.
Stothert said the new report shows “we are headed in the right direction. But there’s still more that must be done.”
The pension board is scheduled to discuss the report at its meeting today.
Board member Aaron Hanson said he was “excited and happy” about the new report, but “not totally surprised.”
“We took some pretty unprecedented steps” in changing the pension formula, he said.
The mayor’s attention has turned to the civilian union, and the sides are in negotiations about changes to those employees’ pensions.
Lately she has come under scrutiny from fiscally conservative groups that say the city should push unions away from a traditional pension plan toward one that operates more like a 401(k).
Those groups — including one headed by a former political opponent of Stothert, Dave Nabity — held a Wednesday luncheon on the issue of pensions.
They dispute the underlying assumptions in the city’s pension projections, although Curtiss and Stothert said the city is using good assumptions.
City finance officials say the city’s pension shortfall is nearly $850 million overall, with most of that unfunded liability in the public safety pension. Part of that calculation assumes an 8 percent return on investments over time.
Curtiss said the city has actually seen a higher return — about 9.7 percent over the past 30 years.
He said an 8 percent return rate would be optimistic for a plan that contains only domestic stocks, but the plan is diversified. Officials can reasonably expect to get that 8 percent overall return, he said.
At the luncheon, Adrian Moore of the libertarian Reason Foundation expressed doubt.
“You guys must have the best investment advisers in the world, bar none,” he said. “Not likely.”
The Platte Institute, a Nebraska think tank that co-sponsored the event, also has said an 8 percent return is unrealistic, so the city’s projections underestimate the actual pension shortfall and the time needed to pay it off.
“What Omaha needs is pension reform that offers more certainty for workers, taxpayers and policymakers,” said Jim Vokal, the institute’s CEO.
Meanwhile, the State of Nebraska is taking a closer look at local governments’ pension liabilities.
State Sen. Jeremy Nordquist announced Wednesday that the Retirement Systems Committee will begin implementing a new state law requiring municipalities to provide more detailed reports about pension benefits. The committee will hold public hearings Nov. 19 for governments with a pension shortfall.
Contact the writer: 402-444-1084, roseann.moring@owh.com
Correction: Jim Vokal’s position with the Platte Institute was listed incorrectly in a previous version of this story.