Retirement pensions are one of the most coveted of all employment benefits, and with good reason. Even if a company or government entity is unable to offer a salary that is competitive with others vying for the same workers, offering a pension can be a deal-changer.
It is not money in a worker’s pocket immediately but it provides future security that can’t be matched. But the costs of pensions are high and, as a result, fewer companies are offering them. Today, offering a 401K plan with a company match has taken the place of the straight pension.
But they still exist, and securing a pension is one of the best reasons to seek out a government job. The pension continues in public employment and they can be good even for taxpayers who must pay the bill. That’s because the offer of pension can help attract quality public employees at a lower cost of wages.
Pensions do have some drawbacks for those who must administer them, however. Most important is that enough money is set aside to pay out the pensions.
As the city of Longview has discovered with its fire pension fund, this amount is a constantly moving target and almost always is going to get larger instead of smaller. Sometimes, the change increases dramatically, as in the case of the current year.
In a report to the Longview City Commission, just one year the unfunded liability the city faces for paying out pensions for firefighters increased by a whopping $12 million from the previous year. That’s almost a 25 percent increase in the amount not funded.
The jump is considerable but there’s no reason for panic just yet. The pension will not have to be paid out at once and this particular increase was expected. A large increase that’s expected is far better than a much smaller one that catches the city by surprise.
Having said that, the city still has to deal with unfunded pension liabilities of $62 million, and it needs to do so sooner rather than later. While this money is not needed today and won’t be needed for years, the city doesn’t need to be hit with a crisis 20 years from now.
Pension funding often seems to be one of those matters that come last, especially for governments, which always have an urgent need to spend and little desire to cut back or raise taxes.
A case in point is the Teacher Retirement System of Texas, which earlier this year was projected to be $46 billion underfunded. The state Legislature took steps to shore up the system but the problem is not completely solved. It will take many more steps to make it healthy again.
The Teacher Retirement System is massive compared with the Longview fire pension, but it is important the city close the gap between what is promised and what eventually must be paid out.
Not all of it must be made up at once, but the longer the city waits to take the first steps, the deeper the hole it will find itself in.
This is a reality officials must remember as they consider the proposed budget for the coming year, which calls for immediate massive increases in pay for city employees. Just as the pension obligation can be spread out across several years, so can the desire for higher wages. In that way, both goals could be met.