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Mpls.: Lots of pension-fund hurdles

  • Article by: STEVE BRANDT
  • Star Tribune
  • March 13, 2009 - 9:06 PM

Minneapolis needs pension reform now, Mayor R.T. Rybak told the City Council last month.

Well maybe not quite now.

At the city's request, a legislative pension commission on Friday tabled a bill that would accomplish the city's goal of a pension fund merger, after Minneapolis officials calculated that it would raise property taxes by 19 percent.

Meanwhile, another pension merger bill the city wants for police and firefighters hasn't even been drafted, and the topic likely won't even be studied until after the Legislature adjourns.

The delays come in the face of city officials' rising concern about the cost of funding the now-closed pension plans.

It's becoming progressively harder to fund police and fire pension plans that were closed to new members 30 years ago, with newer employees joining a statewide fund. As most members shifted from working and paying into the city funds to drawing pensions, and the stock market sank, the city's estimates of its extra public safety pension costs soared recently from an expected $102 million over the next five years to $217.5 million, prompting Rybak's remark.

Meanwhile, the closed pension fund serving the remainder of city employees hired before 1979 is facing default in a few years. That's due both to an aging membership and to investment losses.

A bill to merge that Minneapolis Employees Retirement Fund into the comparable statewide pension plan for local employees was heard Friday at the Capitol. But to mollify members of the statewide fund who fear that absorbing Minneapolis would weaken their fund, the bill imposes a $46 million annual extra charge on Minneapolis for 23 years. Minneapolis schools, which also have some employees in the fund, would pay an extra $15 million annually.

Facing those numbers, the council's two point people on pensions, Paul Ostrow and Betsy Hodges, supported by Rybak, asked the Legislature's joint pension commission to table the MERF bill. Pat Born, the city's finance chief, said all parties need to negotiate how much each will contribute to solving the funding issue. "It's going to take everybody to make compromises in their position and do things they may not prefer do to," Born said.

MERF already agreed to forgo a cumulative $129 million cost-of-living clause its members had but the statewide fund lacks. The state also helps prop up MERF -- to the tune of $9 million this year -- but the bill's House sponsor, Rep. Paul Thissen, DFL-Minneapolis, said that figure could change.

With no pension commission meetings scheduled after next week, time for negotiating is short, but commission Chairman Don Betzold, DFL-Fridley, said it's possible a compromise could be added to an omnibus pension bill later this session. But he added that he'll likely oppose an attempt at a last-minute amendment to merge the Minneapolis police and fire funds into a statewide fund.

Steve Brandt • 612-673-4438

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