The most precarious public pension plan covering Minneapolis employees has shown a dramatic turnaround, hitting a crucial financial milestone and renewing debate over whether to throttle back state and local contributions and potentially save taxpayers millions of dollars.

"This is excellent news from our perspective," said City Council Member Elizabeth Glidden, the council's point person on state issues.

The Minneapolis Employees Retirement Fund, with about 4,000 members, has been closed to new enrollees since 1978. The problem worsened during the Great Recession when most members were retired and pension investments plummeted. In 2009, the pension projected it had only 56 cents for every dollar of future pension checks.

A taxpayer bailout in 2010 and a soaring market recovery have brought the fund to 80 percent of full funding, according to a new valuation.

That milestone allows the Minneapolis fund to merge into a statewide pension fund that enrolls newer employees. The merger happens by Jan. 1, under the terms of the 2010 state bailout.

The new analysis also predicts that the Minneapolis fund's $205 million shortfall — less than one-third of its 2009 deficit — could be erased by 2021, a full 10 years before the law requires.

While most pensioners strongly endorse the current funding schedule, some policymakers wonder whether it is wise to erase the deficit that quickly.

State Sen. Sandy Pappas, DFL-St. Paul, current chair of the legislative pension commission, said it's clear that the current taxpayer contribution level can be cut, although she thinks the commission will move cautiously to avoid overreacting.

Another pension commission member, Rep. Phyllis Kahn, DFL-Minneapolis, said she doesn't think full funding is a good idea, mainly because that builds pressure to raise benefits, which can create new funding issues.

"If you back off on state and employer contributions without backing off on what's going to retirees, what's the problem?" Kahn asked.

One consequence of slowing the schedule for full funding is that it would free millions for the state and local government. The state raised its annual contribution to the fund from $9 million to $24 million under the bailout. The contribution of the seven local governments with retirees in MERF — chiefly Minneapolis — jumped from $5 million to $32 million.

Larry Martin, longtime staff chief of the pension commission, said he expects that elected officials might seek to free up some of their Minneapolis pension funding to use on other priorities.

That wouldn't sit well with retirees. Their lobbyist, David H. Johnson, said the 2010 rescue was built on mutual sacrifice. While the public raised its contributions, pensioners agreed to a tighter cost-of-living increase until the statewide plan reached its own funding target. Easing up public contributions now would be "like taking a snapshot in the middle of a roller-coaster ride," Johnson said. "You don't want to go back to square one."

Minneapolis city government retirees accounted for more than half of MERF retirees; the balance were nonteaching school employees and workers at five other public agencies. The city's levy for MERF contributions increased by sevenfold beginning in 2012, a jump that ate into the city budget.

Mayor Betsy Hodges' spokeswoman said the city is waiting for a fuller analysis of the pension funds.

"The city will not make any decisions regarding funding of our pension obligations without thoughtful consideration of all the factors, including those factors that we don't control," spokeswoman Kate Brickman said.

Steve Brandt • 612-673-4438

Twitter: @brandtstrib