Amid strong opposition from city employees, Stacy Head pulls plan to reform pension system

By Jessica Williams

April 27, 2017

After a boisterous New Orleans City Council committee meeting Thursday at which dozens of city workers railed against a proposal to make the municipal pension plan less generous for newer employees, the proposal was yanked by its sponsor, who pledged to try to craft more widely acceptable changes.

But it’s unclear whether any future revisions by Councilwoman Stacy Head could gain the support of her colleagues, some of whom shied away from any move to alter the pension system so close to October’s municipal elections.

“I’m not going to move this to the full council,” Head said. “But Councilmember Brossett, you will be able to cast that ‘no’ vote before you leave office.”

Just moments before, Councilman Jared Brossett had said the changes should be shelved until the council’s next term, when Head will be out of office.

Meanwhile, Councilwoman Nadine Ramsey questioned whether enough research had been done to prove that the system is in poor enough financial shape to warrant such an overhaul.

Others said the city should first hand out raises before stripping away a popular benefit, despite Head’s touting of a study now underway of just how much money the city should pay its employees.

In a nutshell, the proposed changes would have made newer employees — who make up almost two-thirds of the workers enrolled in the New Orleans Municipal Employees’ Retirement System, or NOMERS — accrue benefits at a slower rate and made new hires work longer before being vested in the system or becoming eligible for retirement.

In addition, the plan would have either ditched cost-of-living adjustments for all retirees until the system is nearly fully funded or else required the city and employees to contribute extra money to fund those increases.

Also drawing plenty of attention was Head’s proposal to reduce what is known as the “multiplier,” or the percentage by which the city usually multiplies an employee’s highest five years of salary in order to calculate their retirement benefit. A lower multiplier means a lower monthly payout.

The bulk of the changes would have affected new hires or city employees with fewer than 10 years of experience.

The heavy criticism was a blow for Head, whose years of efforts to revamp the pension system resulted in a reform plan that included some recommendations from the pension system’s board, some from the nonpartisan Bureau of Governmental Research and some from her own research.

The goal was to throw all sides a bone, while still preserving the integrity of the pension system for future generations, Head said.

But her lengthy presentation was soon shouted down by city employees who said any cut to their pensions was an insult, considering the meager salaries many receive.

“I haven’t gotten a raise since (Mayor) Ray Nagin,” who left office in 2010, Linda Fornerette, who has worked for the city since 1979, said to applause. “Now you want to tell people we deserve even less?”

Kim DeLarge Jr., a capital budget official who has been employed by the city for less than a decade, added that the changes would have an adverse effect not only on him but also on the young employees he manages, who are already turned off by the city’s salaries.

“The city of New Orleans is a huge employer. … I would hate to see our millennials leave, our talent leave,” he said.

Impassioned pleas from employees aside, city budget director Cary Grant said the city’s pension fund, at 72.4 percent funded, is already in better shape than many others. Few municipal systems in the country are fully funded, and 80 percent funding, a threshold private plans are required to meet, has long been used as a benchmark for a healthy plan.

Head has argued that the figure is too low.

The discussion also was bogged down by legal issues, including whether the city could even apply such a sweeping reform to existing employees.

While no clarity was given on that point Thursday — two conflicting state Supreme Court rulings on that point have been handed down in recent years, city officials said — all agreed that any move to change an existing employee’s pension could pose legal challenges.

Still, several organizations have expressed support for Head’s plan, including the Business Council of New Orleans and the River Region, Forward New Orleans and the Committee for a Better New Orleans. Their praise didn’t sway Head’s colleagues.

Too many New Orleanians are being priced out by rising living costs, Councilwoman LaToya Cantrell said. At the same time, the entire city is being hit with a higher tax bill so that the city can pay firefighters back pension payments.

“While they are paying a tax increase for someone else’s pension, we are recommending that they take a decrease to their pension. That doesn’t seem fair,” Cantrell said.

Councilman Jason Williams added that changing a system that is used to help lure new hires to the city was unwise just ahead of a changeover in city government.

Head, visibly exasperated, called out Brossett and Ramsey for not fulfilling a pledge she said they made to business groups to reform the pension system. She also accused her colleagues of stifling her efforts to make changes before her term ends.

“I believe we need to do our job until the final day, and I will be moving this forward,” she said.

Editor’s note: This story was changed on April 28 to clarify how the proposed changes would affect newer employees and to correct the number of years of salary the city usually multiplies to calculate an employee’s retirement benefit.

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