Tomorrow, City Council is scheduled to vote on ballot language regarding the police pension plan. Police are requesting a shift from the locally-controlled defined contribution plan (MPPP) to a statewide defined benefit plan (FPPA). The police wishes to affiliate with the FPPA, a statewide plan governed by police, fire, and city management officials, to name a few.
The fire department is already affiliated with FPPA and the city is NOT recommending they unaffiliate, despite the plan being administered by the same entity the police are seeking to affiliate with.
This vote comes after an inability for the city and the police union to come to an agreement during collective bargaining in the 2018 cycle.
That said, I want to be very clear about where I stand and why. But first, a little background on how we got here.
Currently, our officers do not pay into or receive social security, something that was decided long ago and cannot be reversed. They do not have a pension plan (they have a retirement plan much like a 401k and is a defined contribution), nor do they have (in my opinion) adequate post-retirement health benefits between the ages of 55 and 65.
Roughly 50% of our officers currently outlive their retirement benefits.
Even so, an independent fact finder has determined that a move to FPPA is not a good choice (although she does agree that our current retirement plan is inadequate, calling the percentage of officers outliving their benefits “surprising and saddening”).
I have concerns about the fact finder’s report from a factual standpoint.
Read the fact finder’s full report here (posted with permission – public document)
First, one of the comparisons used is CalPERS (the California Public Employees Retirement System), which is notorious for being underfunded and is not comparable to the FPPA in its administration or funding, as CalPERS covers ALL public employees and has dipped 30% below what the FPPA ever has. This is, quite literally, a worst-case scenario comparison.
Second, the fact finder relies on information from the American Legislative Exchange Council (ALEC). ALEC is a right-leaning lobbying organization with an explicit goal to replace defined benefit plans with defined contribution plans and has even created model policy to do so. They also actively work to undermine unions on a national scale with right to work laws, privatized education, and weakened consumer protections.
A fact finder who cites ALEC as a source in any way, shape, or form in a union negotiation (whose existence ALEC opposes) over defined benefit plans (which ALEC also opposes), is sloppy and a deliberate choice to use partisan “data” for a nonpartisan decision. If a publicly anti-union, anti-defined benefit organization that is funded by big banks who financially benefit from a shift to defined contribution plans is allowed to be introduced as “fact”, then I have to question the validity of the entire report.
On the flip side, the Center for State & Local Government Excellence, has a different perspective. The Center’s board includes members from the National League of Cities, Government Finance Officers Association, National Governor’s Association, and more, all of which are non/bipartisan. SLGE highlights that DB plans still do well in public sectors, in part because “Public plans are exempt from federal regulations covering private plans, making them less expensive to run.” You can learn more here.
That said, here is why I support the right of our officers to vote on whether or not to take control of their retirement plans:
Agreeing to move forward with FPPA does not automatically enroll the police in a new plan, however it does allow them to start the process of getting educated on their individual retirement options and the ability to vote on whether or not to shift to FPPA (with a 65% majority), which the city would be required to comply with if they choose to do this.
FPPA is a traditionally well-funded plan that our fire department participates in, along with over 200 other public safety departments around the state. The fact finder report states that the DB plan is “actuarily sound”, assuming funding remains about 80% (the lowest the FPPA has gone, to my knowledge, is 99% funded), even throughout the Great Recession (by comparison, officers in the current DC/MPPP plan lost up to 50% of their savings).
Additionally, for the past 23 years, the FPPA has received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association, which is comprised of roughly 17,500 government finance professionals. According to their site, “This award represents a significant accomplishment by a government entity and its management in the area of governmental accounting and financial reporting.”
Two of the major concerns raised during public comment and on the dais at the last Council meeting are the loss of local control and the possible increases in administrative fees for retired officers.
With regard to loss of local control, I find this to be a weak argument that is often used inconsistently (I imagine if we were all state legislators or congressmen/women, our definition of “local” would be very different). Even so, local control has not, thus far, done much to benefit the half of the officers who are outliving their benefits. While there is a real risk in moving to FPPA, so there are risks in chronically underfunding our officers retirements as is being done today, not to mention the ethical implications of leaving them unprepared for retirement.
Furthermore, the FPPA has several stopgap measures to prevent any increases in city contributions. If 200+ departments and the FPPA board (which includes members of management-level city representatives, of which Aurora could join) do, indeed, decide an increase is necessary, then it is not unreasonable to assume the economy is not doing well and our officers’ plans under city management will be in trouble, as well. In this case, city savings could easily come at the expense of our officers who, again, already outlive their retirement benefits.
As for the administrative costs, there are simple mitigation options available if we choose to get created. The city, for example, has the ability to offset the costs for the 100-or-so retirees in the plan for the benefit of every officer moving forward using the 2% savings in the lower contribution rate the FPPA requires. To not do so is a choice.
For me, this vote is about more than retirement plans. It is about:
- Personal choice: Each officer deserves the opportunity to become educated on their options and choose their financial future. This is something that our fire department is currently able to do, but our police are not. The current plan is not sufficient for 50% of our officers and this is unacceptable.
- Transparency: Our officers deserve to what their options are, not be prevented from getting educated about their options. A vote to send this to the ballot is a vote to strip them of this right.
- Labor: In an effort to ensure our public safety employees are prepared for retirement (which tends to come earlier for physically demanding jobs), unions around the state have shifted to this plan with great success. To assume that our police union is any less worthy of choice and transparency in their future flies in the face of what the labor movement stands for: raising standard of living for the working class, increasing benefits, and financial security.