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New Orleans firefighter pension changes pass Louisiana House

By Jeff Adelson, / The Times-Picayune
May 14, 2013

A package of bills trimming the generosity of the troubled New Orleans Firefighters Pension and Relief Fund breezed through the House on Tuesday. The bills would give the city more oversight over the fund and would mean increased contributions and smaller benefits for the firefighters, but fall short of a more aggressive effort that would have allowed the city to take control of the fund.

The final package that passed the House without opposition is a compromise between competing changes offered by Rep. Jeff Arnold on behalf of the firefighters and Rep. Kevin Pearson on behalf of the city. But the plan, worked out by the House Retirement committee earlier this month, tilts in favor of the firefighters’ proposal.

In addressing the House, Arnold, D-New Orleans, said the proposal represents a deal that contains input from both sides, and he pledged not to alter it as it moves through the Senate without the agreement of each of the parties. “I will not make any changes to the bills that both the city and the firefighters don’t agree on as they move through the process,” Arnold said.

The New Orleans firefighters fund has been beleaguered for years, a predicament the city blames on poor management and the firefighters blame on too little funding from the city. Last year, the city owed about $63.6 million to the fund, more than an eighth of its general fund revenues.

The city still owes about $157 million to the original firefighters pension system, which was replaced by the current one in 1968, and the new fund has enough assets to cover only about 40 percent of its obligations, according to a report from the Bureau of Governmental Research, a nonprofit think tank. And its financial woes have been exacerbated in recent years by a city decision to invest about $171 million in bond proceeds in the stock market just before it crashed, an investment of about $15 million with a hedge fund manager accused of running a pyramid scheme, and heavy investments in real estate.

A key element of the plan is a shake-up of the pension system’s board. New Orleans officials had proposed essentially eliminating the existing pension system and moving its assets and obligations to a new fund created and controlled by the city.

The Bureau of Governmental Research argued that putting city in charge would have been an important step in getting the pension fund back on track, and supported New Orleans Mayor Mitch Landrieu’s effort. “The bill will not get the city out of its current dilemma, but it offers hope for stopping the bleeding,” the group said in a report released last month.

However, the House Retirement Committee shot down that proposal. Instead, the committee approved a proposal that would shrink the existing board from 10 members to seven while giving the city more power to block changes that would increase benefits.

Under the proposal, the board would be made up of two active and two retired firefighters, two city employees and one person appointed directly by the mayor. But a two-thirds vote would be required to grant cost-of-living increases or disability benefits, requiring that both sides come to a compromise before that could come to pass.

Under the proposals, firefighters would see their contributions to the pension system rise to 10 percent of their paychecks. Those with less than 20 years of service, who now pay 6 percent of their wages to the fund, would see that amount increase by two percentage points in each of the next two years. Those with more than 20 years of service currently do not have to pay into the pension fund and would be brought up to 10 percent over the course of three years.

The plan also extends the number of years of salary used to calculate an employee’s average pay when determining retirement benefits. That would decrease the amount employees could expect to receive on retirement.

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