Lee: Pension Stew Pot A Financial Screwy Wabbit

Citizen fiscal observer John Marshall Lee asks in a commentary “Remember Elmer Fudd? The little guy, with a funny voice, and a shotgun pursuing his rabbit stew recipe? ‘First you need a rabbit.’ And there was Bugs Bunny looking on, laughing at Fudd, the mighty hunter.”

It reminds me of each of Mayor Ganim’s bonding proposals. Was he really ‘ready,’ before he aimed and fired in 2000? He got the City to borrow $350 Million to be repaid from Police and Fire operating budgets through 2029 totaling $30 Million annually. $900 Million was the expected total price to fund retirement incomes for public safety employees with interest rates around 7.5%. The plan has returned less than 8% assumed. Today net of actual plan assets around $60 Million in the trust Plan A still shows a net pension liability of $250 Million. Paying out $30 Million annually from Plan A to retirees has forced the City to acknowledge increasing expenses, current and deferred because of inadequate earnings. And two major market crashes since 2000 have lost tens of millions that will never become retirement benefits. The taxpayer has to make those up for any amounts required for Plan A. How does that rabbit stew taste today? Were all the costs on the menu and understood? Or was Fudd simply too trigger happy?

City employees have been a part of the CT Municipal Employees Retirement System for many years. The City forwards funds each year to the State-managed MERS plan. The State makes no contributions. MERS tells the City each year what percentage of City Payroll must be paid by the City to MERS to be actuarially current. That funding exceeds 16% of City payroll today. (Teachers are part of a different State plan, Teachers Retirement System and the City makes no contributions.)

However, the City contract with Police and Fire personnel changed in 2015 for the period since 2012. Active public safety employees were moved to MERS from our local Plan B. Because 50% or greater of highest three-year earnings includes overtime, rather than just base pay as previous, MERS indicated that a “past service liability” was created. (Fire $72 Million and Police $135 Million came with a level 28 year schedule.) Bridgeport taxpayers must fund. What is the real MERS amount, based on what MERS is actually able to earn? $90 Million, $270 Million, or is it even closer to $500 Million? Can we get Elmer Fudd to look at this with 20/20 vision?

Like the silly Elmer Fudd, Mayor Ganim is taking aim once again before getting ready with his Bonding shotgun. He has told the public that by bonding $90 Million, a number that does not fully represent our City past service liability today at current 4-4.5% bond rates; he will eliminate all obligations but current ones. That is not true. He has left that impression in Hartford where he has been quoted: “By doing this, Bridgeport would also make the municipal employee retirement fund whole and eliminate any unfunded pension liability in one lump sum.” That sounds wonderful, especially when the bond is sold as a way to save interest because 4% guaranteed interest expense of a bond is better than 8% assumed earnings rate on pensions. But no such savings will occur while Bridgeport is earning 3% on average on its Plan A trust amounts. Nor will the State 10-year earned average on MERS that show a 4.74% return as of April 2017.

What this means is that every year the plans do not earn 8% our current assessment will grow in order to eliminate each new increase to past service liability. Since that is the case, then the expense of bonding that includes $100 Million of interest over the proposed bonding period is funding the taxpayers cannot afford. It clearly does not help us. Just costs.

Elmer Fudd cannot have it both ways. If the City cannot afford to fund our obligations, are we discovering that now? Why did the City agree to the plan in the first place and never share the amount and method with taxpayers? Negotiate again through labor relations with realism and transparency in mind. A bond payment is non-negotiable, once adopted. But labor contracts are always negotiable according to President Trump. And the inclusion of overtime earnings as a part of a base for retirement earnings is not yet five years in practice. Mayor Ganim, why not call on the actuaries we pay to publicly find a way to eliminate $100 Million extra expenses that has you touting bond interest payable as a savings rather than calling them an extra expense as they are? Time will tell.



  1. Plan A gave way to plan B in the early 80’s. Sadly, many of that plans benefactors have passed on and there aren’t very many left who are collecting. It will cease to exist after that.

    1. Actually there are still approximately 711 beneficiaries of Plan A based on CAFR 2016 info, page 65. Please consult it if you have any doubt. And the actuaries, who have all of the info on mortality, interest, and inflation provide the following info on page 66 of the CAFR-2016. They report that the net Pension liability for that plan (which assumes 7% these days) but is earning under 4% in recent years) stands at $250,608,731.
      That is a large number for taxpayers to contemplate, despite the passing of many former public servants and their family beneficiaries. Towards an original target of $350,000,000 that assumed we could borrow money at a lower rate than we could earn in public markets at risk of loss, we guaranteed to pay $900 Million that will not be repaid until 2029, but we only have $60-70 Million in August 2017 in the plan invested towards the $327 Million actuarial calculation and that leaves us with a $250 Million net pension liability. How does the Ganim idea look today? In the rearview mirror? What has changed in the investment world and pension plans specifically that tells us things will go better with MERS which has a ten year average return of 4.74? Is there a Ganim magic that has not been disclosed? Time will tell.

  2. How would we get such a report Phil? What would you ask for that Phantom is not motivated to seek? How much are we adding annually to Plan A to keep it afloat? Is that info available in the Plan A Committee file maintained in the City Clerk office these days? Or just notices of their meetings? Time will tell.

  3. Those of us that were in pension plan A paid 8% of our pay each and every week that went to the General Fund to pay Bridgeport’s bills and were told for this Bridgeport promised us a lifetime pension. I fulfilled my part of the deal with Bridgeport and fully expect then to do the same.

    1. Donald, Ron, Andy, Dave and Dave,
      Almost 700 other retirees and you are due what was promised. I have not wavered from that truth.
      What I have been putting in the SPOTLIGHT is the extent to which Ganim1 concept was more expensive than he promoted in bonding. If we study the failure, that we will experience for another 12 years, that includes expenditures in addition to bond repayments because markets were not able to produce over a 30 year period, returns as assumed. So bonding became a route to added expense, not a “simple method to save taxpayer money” as he says in 2017.

      Why is no one learning from our current history and asking questions? Stafstrom and Stafstrom, each wearing their individual hats, have brought us to this point. Did John Stafstrom in his role as City bond council, or at least adviser to Mayor Ganim in Hartford have any comments? What would he say in the City today? Is there any matter for ethical study in this case? Does it matter if one professional proposes a law and advances and supports it but does not vote while another member of the same firm is retained by the client for professional advice? Maybe they could hold a meeting in the City to point out the extent of actual pension liabilities today? And maybe once we knew the total obligation (with interest assumed as what City and MERS have been earning on average for ten years) we can get out of Fantasyland and select a method of meeting what may have been unaffordable when decided recently? Time will tell.

    2. Don, I’m glad that you stated something that most residents of Bridgeport are not aware of when you said, “Those of us that were in pension plan A paid 8% of our pay each and every week that went to the General Fund to pay Bridgeport’s bills and were told for this Bridgeport promised us a lifetime pension.”
      Don, we fulfilled our part of the deal with Bridgeport and fully expect then to do the same. It seems that there are those who do know what about what you wrote keep over looking that and they NEVER address that fact. Instead they look at other issues instead of making sure that the City keeps its part of the deal. Again, we did our part of saving Bridgeport and helping it to function by using our pension and our future income to run and help fund the Bridgeport school system and so many other City departments, in fact we don’t even get a thanks for that. There are those still trying to find away to either reduce or to take our pensions away from us.

  4. Pension obligations have been the 400 pound gorilla in the room for decades.
    The A and B plans were in trouble since the late ’70s, maybe sooner.
    Moving police and fire to the MERS made sense except for including overtime in the pension calculation. Thank you McCarthy and the Finch administration.
    JML is pointing to assumptions of earnings on bonding at a level that is not realistic. How can this happen? Easy. Any shortfall will be covered by Bridgeport taxpayers. There is no guarantee.
    Understanding this fundamental exercise is apparently beyond the ability of the city council members and Bridgeport’s State delegation.

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